Tactical Management continues to be a broad and ambiguous term that includes a variety of active investment strategies. In my interview on Harvest, I tried to provide some clarity:
I like to define Tactical Management as being synonymous with Tactical Asset Allocation or TAA: focusing a portfolio on asset classes with the best expected return and risk.
Our approach can be summarized as fundamental, forward-looking, and systematic. And as all of investing, Tactical Management must be forward-looking. Most investment professionals also would agree that fundamentals drive markets. Lastly, it must be systematic in order to be objective and not driven by emotion – as we know, emotion is the investor’s worst enemy.
Active management means forecasting. We realized that early on that we must forecast asset class risks and returns, and we developed a statistical model to do so. The model includes over 20 factors and all of these factors are fundamental in nature. These are different economic variables, valuation measures, and other factors. Having a consistent model allows us to execute a systematic, model-driven approach which minimizes subjectivity, or judgment and therefore is systematic.
Model Capital Management LLC is a tactical investment manager. Please review the following pages for more information on Model Capital’s approach to tactical investment management and our tactical SMA strategies.