TREND EQUITY // SECTOR SERIES
Seeks to capture a significant portion of broadly diversified equity market growth over a full market cycle while reducing the impact of severe and prolonged market declines.
- May not be tax efficient
- May not closely track the strategy’s benchmark
- Does not seek outperformance versus equity market benchmarks
- Unlikely to protect against short-term volatility
Available in U.S. large-cap, U.S. small-cap, and Global equity variations.
- Employ a systematic trend following approach that can move the portfolio entirely to high quality, short-term fixed income in effort to avoid significant losses.
- When invested, allocate across primary equity sectors that are exhibiting positive trends.
- Review tactical models on a weekly basis.
Detailed process information available in the Document Center.
Research on Trend Following
Questions & Answers
The portfolio invests in exchange traded funds (ETFs) representing equities of the primary economic sectors. We utilize ETFs as the building blocks of its portfolios because they are a transparent, cost-effective, and highly liquid means of gaining and managing exposure to particular asset classes and market sectors.
There are three variations of the portfolio available: Global large-cap, U.S. large-cap, and U.S. small-cap.
The portfolio employs a trend-following process that seeks to identify negatively trending sectors and remove them from the portfolio. To enforce diversification, the remaining sectors are given an equal allocation within the portfolio, with a cap of 25%. In the case where there are 3 or fewer sectors exhibiting positive trends, a position in short-term U.S. Treasuries is built. In extreme situations, this portfolio can be invested entirely in short-term U.S. Treasuries in effort to preserve capital.
The portfolio is evaluated on a weekly basis. In stable market environments, we expect to make few, if any, portfolio changes; in higher risk environments we expect to trade the portfolio more frequently in effort to keep up with changing market dynamics.
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