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.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- Compared with the benchmark ACWI (42.3%) in the period of the last 5 years, the total return of 98.7% of Global Market Rotation Strategy is greater, thus better.
- During the last 3 years, the total return, or increase in value is 47.4%, which is greater, thus better than the value of 38.9% from the benchmark.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- Compared with the benchmark ACWI (7.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 14.7% of Global Market Rotation Strategy is greater, thus better.
- During the last 3 years, the annual return (CAGR) is 13.8%, which is larger, thus better than the value of 11.6% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Compared with the benchmark ACWI (13.2%) in the period of the last 5 years, the 30 days standard deviation of 7.1% of Global Market Rotation Strategy is lower, thus better.
- During the last 3 years, the 30 days standard deviation is 6.6%, which is lower, thus better than the value of 12.3% from the benchmark.

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

Using this definition on our asset we see for example:- The downside volatility over 5 years of Global Market Rotation Strategy is 7.8%, which is smaller, thus better compared to the benchmark ACWI (14.5%) in the same period.
- During the last 3 years, the downside volatility is 7.4%, which is lower, thus better than the value of 13.9% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:- The risk / return profile (Sharpe) over 5 years of Global Market Rotation Strategy is 1.72, which is greater, thus better compared to the benchmark ACWI (0.36) in the same period.
- Compared with ACWI (0.74) in the period of the last 3 years, the Sharpe Ratio of 1.71 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.'

Applying this definition to our asset in some examples:- Looking at the downside risk / excess return profile of 1.57 in the last 5 years of Global Market Rotation Strategy, we see it is relatively higher, thus better in comparison to the benchmark ACWI (0.33)
- Looking at downside risk / excess return profile in of 1.53 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (0.65).

'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:- Looking at the Ulcer Ratio of 1.59 in the last 5 years of Global Market Rotation Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark ACWI (6.14 )
- Looking at Downside risk index in of 1.36 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to ACWI (4.99 ).

'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:- The maximum drop from peak to valley over 5 years of Global Market Rotation Strategy is -6.5 days, which is higher, thus better compared to the benchmark ACWI (-19.5 days) in the same period.
- Compared with ACWI (-19.5 days) in the period of the last 3 years, the maximum drop from peak to valley of -6.4 days is larger, 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.'

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 178 days, which is lower, thus better compared to the benchmark ACWI (408 days) in the same period.
- During the last 3 years, the maximum days below previous high is 141 days, which is lower, thus better than the value of 284 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark ACWI (118 days) in the period of the last 5 years, the average time in days below previous high water mark of 36 days of Global Market Rotation Strategy is smaller, thus better.
- Compared with ACWI (70 days) in the period of the last 3 years, the average days under water of 29 days is smaller, thus better.

Historical returns have been extended using synthetic data.
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- "Year" returns in the table above are not equal to 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.