Allocations
Dynamically managed portfolios designed to reduce risk when market conditions are less than ideal.
Our Active Management Process
While each model has some level of management inherent in its investment mandate, each of those only provides minimal risk reduction. We add another layer of management at the allocation level to further protect assets during periods of market uncertainty. When we deem it appropriate based on market conditions, we alter the model weightings within an allocation and reduce overall risk. If all of our investment signals indicate uncertainty, we will reduce each allocation’s equity exposure by 50%. For example, allocations normally invested in 100% equity-based models would be reduced to 50% equity-based models while allocations normally at 70% equity exposure would be reduced to 35% equity exposure. Funds are redirected to non-correlated asset classes including fixed income, cash, gold, and commodities. Once our indicators begin to signal that market conditions have improved, we will reposition the allocations at their original weightings.
Alpha/Omega
This pair of algorithms created and managed by Titan Capital Management focus on technical aspects of the equity market to interpret the short-term and long-term trend of the S&P 500. The data that it takes into consideration include price levels and fluctuations, underlying volume of those price movements, the breadth of up and down moves (how many of the stocks in the index are responsible for pushing the index up or down), and market sentiment. All factors combine to provide a bullish or bearish signal for the short and long-term.
Gamma
This third signal is a technical market and momentum focused indicator that provides an intermediate to long-term forecast of which market sector, between Growth Sector Stocks versus Value Sector Stocks, is poised to outperform. Our Gamma Signal influences the exposure and weighting of growth sector equities versus value sector equities in our actively managed equity models.
In Combination
We use Alpha and Omega to help us make allocation level changes. By combining technical and fundamental indicators, we can get a better idea of what may lie ahead. Alpha and Omega provide a signal that the stock market environment is either favorable or not, and if either signal points to uncertainty, we will begin to reduce risk exposure in our allocations. Each signal functions as a “risk on” or risk off” lever. When both signals are positive (“buy”) signals, our allocations will be fully invested in the maximum equity exposure. As each signal turns to a negative (“sell”) signals, we will reduce our allocation’s equity exposure by 25%. A similar discipline is followed when conditions begin to improve. When a signal indicates a favorable investment environment and turns positive again (“buy”), we increase exposure to equity models by 25%. Our GAMMA signal helps us determine the weightings of underlying holdings within the equity models used in our Allocations. When GAMMA indicates Growth Sector as favorable, we will shift to a greater weighting of growth stocks in our Equity Models. When GAMMA indicates Value Sector as favorable, we will shift to a greater weighting of value stocks in our Equity Models. By combining these three market focused signals, we seek to enhance the performance of our allocations at multiple layers – first by adjusting the weightings of the underlying equity model holdings, and second by changing the asset allocation weightings at the allocation level to increase risk exposure when market environment is favorable, and reducing risk exposure when the market environment is unfavorable.
Our Allocations
Our clients’ portfolios are typically invested in one of our pre-built allocations. These are simply an aggregation of the various models that we offer designed to provide diversification and risk management. For clients whose objectives don’t fit nicely into one of the existing allocations below, we can instead invest in individual models at custom weightings. What follows is a list of the various allocation groups that we offer and an explanation of what types of investors they are tailored for.
Growth Allocations
Objective
Our Growth allocations are focused on capital appreciation and are best suited for clients with a long investment horizon. Clients looking to begin taking income from their portfolio in the short-term might be better suited in the Income or Blend models. There are a wide range of Riskalyze scores represented in the growth models, so even moderate to conservative investors will have a suitable choice within this category
Components:
- Large, Mid and Small Cap Equity
- Global Sector Rotation
- Diversified Asset Blend
- Diversified Fixed Income
Income Allocations
Objective
The Income allocations primarily focus on generating a stream of dividend income for investors making regular withdrawals from their investment account. These dividends can help offset some of the need to liquidate principal. Younger investors can benefit from reinvesting dividends and increasing the dividend growth rate already present for greater income in the future. While these allocations will still generate capital appreciation, more aggressive investors looking for primarily upside potential would be better suited in the Growth or Blend allocations.
Components:
- Dividend Growth
- Diversified Asset Blend
- Diversified Fixed Income
Blend Allocations
Objective
The Blend allocations offer a mixture of the capital appreciation potential provided by the Growth allocations with the dividend focus of the Income allocations. These provide more potential for growth than the Income models which comes from the alpha built into the Large/Mid/Small Cap and Gloabal Sector Rotation models. However, there is still a modest stream of dividends provided by the Dividend Growth and Fixed Income models. These allocations are ideal for clients who are still focused on growth in their portfolio, but can also see retirement approaching and want to start building a stream of rising dividends for it. As with the other two categories, our Blend allocations come in a wide array of risk tolerances.
Components:
- Large, Mid and Small Cap Equity
- Global Sector Rotation
- Dividend Growth
- Diversified Asset Blend
- Diversified Fixed Income
