The Global Market Rotation Strategy is one of our core investment strategies. The strategy invests on a monthly basis in one of five broad global markets. It hedges the global equity exposure with variable allocation to the HEDGE sub-strategy.

December 2016 Update: We are enhancing the Treasury hedge. Before we allocated part of the portfolio to longer-term treasuries, namely the 3x leveraged ETF version, TMF. From now on we will be allocating to the best bond ETF as chosen by our Bond Rotation strategy (BRS). BRS choses from the JNK, CWB,PCY and TLT ETFs.

December 2015 Update: We are adding currency hedged ETFs in the universe that our algorithm can see. That means that we allow our algorithms to choose between a non-hedged ETF like EWG or a hedged ETF like HEWG. This allows our algorithm to input dollar strength as an additional parameter and be able to respond accordingly. This does not change the current logic, which is to bet on the best performing regions or countries. What it does is that it allows, in the case of extended dollar strength, to partially neutralize foreign currency risk for our U.S. based investors.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:- The total return over 5 years of Global Market Rotation Strategy is 85%, which is larger, thus better compared to the benchmark ACWI (37.4%) in the same period.
- During the last 3 years, the total return is 33%, which is higher, thus better than the value of 24.8% from the benchmark.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of Global Market Rotation Strategy is 13.1%, which is larger, thus better compared to the benchmark ACWI (6.6%) in the same period.
- During the last 3 years, the annual return (CAGR) is 10%, which is higher, thus better than the value of 7.7% from the benchmark.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:- Compared with the benchmark ACWI (20.3%) in the period of the last 5 years, the volatility of 9.7% of Global Market Rotation Strategy is smaller, thus better.
- During the last 3 years, the volatility is 8.8%, which is lower, thus better than the value of 16.9% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- The downside risk over 5 years of Global Market Rotation Strategy is 6.8%, which is smaller, thus better compared to the benchmark ACWI (14.8%) in the same period.
- Looking at downside risk in of 6.1% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (11.8%).

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:- The risk / return profile (Sharpe) over 5 years of Global Market Rotation Strategy is 1.1, which is higher, thus better compared to the benchmark ACWI (0.2) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.85, which is higher, thus better than the value of 0.31 from the benchmark.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of Global Market Rotation Strategy is 1.56, which is greater, thus better compared to the benchmark ACWI (0.28) in the same period.
- During the last 3 years, the excess return divided by the downside deviation is 1.23, which is greater, thus better than the value of 0.44 from the benchmark.

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of Global Market Rotation Strategy is 3.28 , which is smaller, thus better compared to the benchmark ACWI (10 ) in the same period.
- Looking at Downside risk index in of 3.52 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (11 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:- Looking at the maximum reduction from previous high of -14.4 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively larger, thus better in comparison to the benchmark ACWI (-33.5 days)
- Compared with ACWI (-26.4 days) in the period of the last 3 years, the maximum drop from peak to valley of -10.4 days is greater, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs) in days.'

Applying this definition to our asset in some examples:- Compared with the benchmark ACWI (431 days) in the period of the last 5 years, the maximum days below previous high of 281 days of Global Market Rotation Strategy is lower, thus better.
- Looking at maximum days under water in of 281 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to ACWI (431 days).

'The Average Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:- Compared with the benchmark ACWI (104 days) in the period of the last 5 years, the average time in days below previous high water mark of 56 days of Global Market Rotation Strategy is lower, thus better.
- Compared with ACWI (143 days) in the period of the last 3 years, the average time in days below previous high water mark of 74 days is lower, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Global Market Rotation Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.