Strategy Description
The style of equity investments is determined by size and value/growth characteristics. During the market cycle, different investment styles rotate in and out of favor. This strategy attempts to take advantage of this rotation by using a rules-based approach to determine the top two ETFs to invest in from a basket of U.S. style ETFs.
During down markets, the model uses our downside risk protector© to invest in cash or short-term securities. This allows for growth potential while managing risk.
The three company capitalization sizes – Small Cap, Mid Cap, and Large Cap – combined with Growth, Value, and Blend, or Core, create the nine different styles of companies.
The U.S. Style Rotation model rebalances monthly.
Definitions
Sharpe Ratio – the average return earned in excess of the risk-free rate. A higher Sharpe Ratio is better
Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset. A higher Sortino Ratio is better.
What is drawdown?
Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period. It is an important measurement of risk. A larger drawdown requires a more significant increase in the security to recover.
