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:- The total return over 5 years of Global Market Rotation Strategy is 85.1%, which is smaller, thus worse compared to the benchmark ACWI (95%) in the same period.
- Looking at total return in of 36.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to ACWI (56.6%).

'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.'

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 smaller, thus worse compared to the benchmark ACWI (14.3%) in the same period.
- During the last 3 years, the annual return (CAGR) is 11%, which is smaller, thus worse than the value of 16.1% 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.'

Applying this definition to our asset in some examples:- The historical 30 days volatility over 5 years of Global Market Rotation Strategy is 10.5%, which is lower, thus better compared to the benchmark ACWI (17.9%) in the same period.
- During the last 3 years, the historical 30 days volatility is 12.3%, which is lower, thus better than the value of 21.2% 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 risk over 5 years of Global Market Rotation Strategy is 7.8%, which is smaller, thus better compared to the benchmark ACWI (13.2%) in the same period.
- Compared with ACWI (15.7%) in the period of the last 3 years, the downside volatility of 9.3% is lower, thus better.

'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:- The Sharpe Ratio over 5 years of Global Market Rotation Strategy is 1.02, which is higher, thus better compared to the benchmark ACWI (0.66) in the same period.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.69, which is greater, thus better than the value of 0.64 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 1.37, which is larger, thus better compared to the benchmark ACWI (0.89) in the same period.
- Looking at ratio of annual return and downside deviation in of 0.91 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to ACWI (0.87).

'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 Downside risk index of 2.82 of Global Market Rotation Strategy is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 3.52 , which is smaller, thus better than the value of 6.53 from the benchmark.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Applying this definition to our asset in some examples:- The maximum reduction from previous high over 5 years of Global Market Rotation Strategy is -20.7 days, which is larger, thus better compared to the benchmark ACWI (-33.5 days) in the same period.
- Looking at maximum drop from peak to valley in of -20.7 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (-33.5 days).

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- Looking at the maximum days below previous high of 94 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (373 days)
- Looking at maximum time in days below previous high water mark in of 94 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (133 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.'

Applying this definition to our asset in some examples:- The average days under water over 5 years of Global Market Rotation Strategy is 19 days, which is smaller, thus better compared to the benchmark ACWI (81 days) in the same period.
- During the last 3 years, the average days below previous high is 21 days, which is lower, thus better than the value of 26 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.