Tactical Limit-Loss Investment Strategies

Our tactical investment management strategies alter the portfolio asset allocation based on asset class return and risk forecasts. As opposed to buy-and-hold strategies that follow the market's ups and downs, tactical strategies attempt to avoid market downturns, but to participate in the upside.

All strategies are implemented with liquid broad-index ETFs that are well-diversified across securities and sectors. Strategies are limited to U.S. markets; no currency or emerging-market risk is taken. We use long-only exposures, no short-selling or inverse ETFs.

MCM tactical investment strategies

Stocks-Bonds

The objective of the Stocks-Bonds strategy is to provide US market exposure and participation in rising markets while heavily emphasizing risk in down markets through the combination of multiple asset classes including equity, fixed income, and cash equivalents. The strategy allocates up to 100% of assets to equities (risk-on allocation) or to fixed-income or cash equivalents (risk-off), primarily based on our model's 6-month return forecast for equities, also taking into account risk and other fundamentals. This top-level allocation to major asset classes is the primary source of performance for this strategy relative to its benchmark.

Risk profile: Moderate Growth

Peer benchmark: Morningstar® Tactical Allocation

Market benchmark: 60% SPDR® S&P 500 ETF (SPY), 40% iShares Core U.S. Aggregate Bond ETF (AGG)

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Complete Market

The objective of the Stocks-Bonds strategy is to provide US market exposure and participation in rising markets while heavily emphasizing risk in down markets through the combination of multiple asset classes including equity, fixed income, and cash equivalents. The strategy allocates up to 100% of assets to equities (risk-on allocation) or to fixed-income or cash equivalents (risk-off), primarily based on our model's 6-month return forecast for equities, also taking into account risk and other fundamentals. This top-level allocation to major asset classes is the primary source of performance for this strategy relative to its benchmark.

Within equities, the manager allocates to equity style (Value, Growth) and size (Large-, Mid-, Small-cap) ETFs that are expected to outperform the broad equity market in a given environment. Within fixed income, we allocate to short-term bonds, Treasuries, investment-grade corporate bonds, high-yield bonds, or senior loans, depending on their term-risk and credit-risk premium.

Risk profile: Growth. Note: small-cap equity, non-investment grade bond risk exposures may at times be taken.

Peer benchmark: Morningstar® Tactical Allocation

Market benchmark: 60% SPDR® S&P 500 ETF (SPY), 40% iShares Core U.S. Aggregate Bond ETF (AGG)

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2xStocks-Bonds

The objective of the Stocks-Bonds strategy is to provide US market exposure and participation in rising markets while heavily emphasizing risk in down markets through the combination of multiple asset classes including equity, fixed income, and cash equivalents. The strategy allocates up to 100% of assets to equities (risk-on allocation) or to fixed-income or cash equivalents (risk-off), primarily based on the PAR Model’s™ 6-month return forecast for equities, also taking into account risk and other fundamentals. This top-level allocation to major asset classes is the primary source of performance for this strategy relative to its benchmark.

When in risk-on mode (in equities), the manager allocates to broad large-cap equity ETFs, and may implement up to 200% equity exposure (2x leverage) if the model’s return forecast for the equity market is above 5%.

Risk profile: Aggressive Growth

Benchmark: SPDR® S&P 500 ETF (SPY)

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Risks
  • All our tactical investment management strategies are suitable only for investors who can tolerate market volatility. Some of our strategies (Stocks-Bonds, Complete Market) will be invested 100% in equities in some periods. Further, our most-aggressive 2xStocks-Bonds strategy utilizes leverage of up to 200%, and is suitable only for investors who can tolerate considerable volatility and downside risk.
  • On average over time, volatility of each strategy is expected to be comparable to its respective benchmark, but may exceed it in some periods.
  • Downside risk (maximum drawdown) is expected to be lower than that of the benchmark, but significant drawdown may occur if portfolios are invested in equities and our models are inaccurate.
Important Notices

Advisory services are offered through Model Capital Management LLC, an investment advisor registered in MA. See other important disclosures.

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