A Strategy for Every Investor
How Much Protection Do They Offer Against Common Investment Risks?
The Strategic Market Strategy
Comfortable receiving market returns.
Strategic Market Strategy is invested in a globally diversified portfolio of twenty asset classes, including equity, fixed income and alternative asset classes and is designed to replicate market performance over the long term. The Nobel prize-winning name for this strategy is Modern Portfolio Theory (MPT).
Modern Portfolio Theory
Not All MPT Solutions are Created Equal
Strategic Market portfolios stand apart from other MPT portfolios based on:
Risk Management. Carefully select 20 assets classes to represent a truly diversified portfolio that can also produce a market return. Among them are alternative asset classes with low correlations and a variety of securities designed to better hedge the risk of rising interest rates.
Low Cost Structure. MPT portfolios naturally produce returns that lag the market due to transaction costs. Seek to minimize that drag by employing ETFs with low expense ratios and using ETFs with no transaction fees whenever possible. In addition, the trading team uses sophisticated techniques to minimize the effects of bid/ask spreads.
Tax Management. Over and above the natural tax efficiency of MPT portfolios, Employ Asset Location and tax loss harvesting. Asset Location places securities with the highest potential for taxable income/ gains in tax-deferred accounts. Studies show this technique can add 0.20-0.50% to after-tax returns.
Planning Flexibility. Customize Strategic Market portfolios to accommodate legacy securities and other important planning requirements.
The Dynamic Market Strategy
Embracing the market … safely.
Modern Portfolio Theory … PLUS
The Dynamic Market Strategy is constructed with a Core Portfolio (70%) and a Satellite Portfolio (30%). The Core Portfolio invests in the Strategic Market Strategy, a traditional MPT-based portfolio designed to capture the returns as well as the risks of the market.
How It Works
Create a proprietary risk overlay that drives the asset allocation decision in the Satellite Portfolio. The risk overlay is driven by: market valuation and technical momentum.
Technical Momentum. A common investment pitfall of valuation is that an asset class can be cheap and then become even cheaper still. This phenomenon is called a “value trap”. To avoid this possibility, employ technical momentum indicators to determine when markets have bottomed and it is safe to purchase cheap assets. Conversely, markets can continue to rise even when expensive. These indicators also ensure does not sell equities too soon.
The Dynamic Prime Strategy
Tactical, risk-managed portfolios.
A More Effective Way to Manage Risk
The Investment Team conducts a rigorous process that continuously evaluates the Business Cycle, Monetary Policy, Valuation, Technical Conditions, Quantitative Analysis and Independent Research to ascertain the most probable risk-return outlook for global investment markets. Then portfolio volatility, sector rotation and security selection are considered.
A weight-of-the-evidence approach is employed that requires a majority of factors to support decision-making. This helps defend against the possibility that dogmatically following any one factor will lead to an incorrect conclusion.
The Dynamic Quant Strategy
Protecting against market decline and manager error.
The Dynamic Quant Strategy is for investors who prefer a more active risk-managed solution, but who seek some measure of balance between the more qualitative decision-making of a manager – Manager Risk – and the less emotional decision making of a quantitative strategy – Strategy Risk.
A Different Kind of Quant Strategy
Dynamic Quant is something different. As a fiduciary, and recognizing that quant strategies tend to work right up until to the moment they fail, believed offering a strategy 100% dependent on an algorithm was imprudent. Dynamic Quant hedges that risk by creating a Core Portfolio (62.5%) with flagship Dynamic Prime Strategy and a Satellite Portfolio (37.5%) with its US quantitative strategy. In addition, consistent with bias towards value, the quantitative algorithm is driven primarily by relative valuation and, to a lesser extent, price momentum.
How It Works
Create a proprietary US-rules based quantitative algorithm to drive the asset allocation decision in the Satellite portfolio. The algorithm is driven first by asset class attractiveness and then by US sector selection.
Sector Selection. Once the algorithm decides to own growth assets (equities), the algorithm scores the attractiveness of the 11 sectors that comprise the S&P 500 based on relative valuation (75%) and price momentum (25%). The algorithm then invests the Satellite Portfolio in the most attractive sectors.
One Model for All Seasons
You may have questions
The best person to help is your Advisor. The conversations you have with your Advisor when putting a financial plan together will clarify the returns needed to meet your objectives and they often reveal a lot about your opinions and feelings about risk. There is both art and science to financial matters and your Advisor is a trained, experienced professional.
Yes, though we don’t generally recommend it. Each investment strategy is designed to meet a specific set of client risk preferences. Moreover, each strategy is designed to serve as a core holding– which means that each is designed to address the total investment requirements of a client. A client should only need one strategy.
On the other hand, if an investor has different objectives for different accounts, it is possible to take advantage of more than one strategy. We recommend caution however so as to avoid creating a horse race between the two strategies as they were each selected as most appropriate for their respective purposes. Performance chasing undermines the effectiveness of portfolio performance by selling a lesser performing strategy to buy at a better performing strategy at exactly the time the laggard is about to outperform and visa versa.