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.'

Which means for our asset as example:- Compared with the benchmark ACWI (99.4%) in the period of the last 5 years, the total return, or performance of 93.2% of Global Market Rotation Strategy is smaller, thus worse.
- Looking at total return, or increase in value in of 39.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to ACWI (46.1%).

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Which means for our asset as example:- Compared with the benchmark ACWI (14.8%) in the period of the last 5 years, the annual performance (CAGR) of 14.1% of Global Market Rotation Strategy is lower, thus worse.
- Looking at compounded annual growth rate (CAGR) in of 11.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to ACWI (13.5%).

'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.'

Which means for our asset as example:- Looking at the volatility of 10.5% in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (18.1%)
- Looking at historical 30 days volatility in of 12.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to ACWI (21.4%).

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Which means for our asset as example:- The downside risk over 5 years of Global Market Rotation Strategy is 7.8%, which is lower, thus better compared to the benchmark ACWI (13.4%) in the same period.
- During the last 3 years, the downside volatility is 9.2%, which is lower, thus better than the value of 15.9% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark ACWI (0.68) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.1 of Global Market Rotation Strategy is higher, thus better.
- Compared with ACWI (0.51) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.76 is greater, thus better.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:- The ratio of annual return and downside deviation over 5 years of Global Market Rotation Strategy is 1.49, which is higher, thus better compared to the benchmark ACWI (0.92) in the same period.
- During the last 3 years, the excess return divided by the downside deviation is 1.01, which is greater, thus better than the value of 0.69 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.'

Which means for our asset as example:- Compared with the benchmark ACWI (6.27 ) in the period of the last 5 years, the Ulcer Index of 2.82 of Global Market Rotation Strategy is lower, thus better.
- During the last 3 years, the Ulcer Index is 3.52 , which is lower, thus better than the value of 7.09 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark ACWI (-33.5 days) in the period of the last 5 years, the maximum reduction from previous high of -20.7 days of Global Market Rotation Strategy is greater, thus better.
- Compared with ACWI (-33.5 days) in the period of the last 3 years, the maximum drop from peak to valley of -20.7 days is higher, 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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:- The maximum time in days below previous high water mark over 5 years of Global Market Rotation Strategy is 94 days, which is smaller, thus better compared to the benchmark ACWI (373 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 94 days, which is lower, thus better than the value of 138 days from the benchmark.

'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.'

Using this definition on our asset we see for example:- Looking at the average days below previous high of 19 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively smaller, thus better in comparison to the benchmark ACWI (81 days)
- During the last 3 years, the average time in days below previous high water mark is 21 days, which is lower, thus better than the value of 37 days from the benchmark.

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.