Managed ETF Strategies with Tactical Income spotlight

Transcription

1 Managed ETF Strategies with Tactical Income spotlight Investor Presentation NORTHCOASTAM. COM

2 N ORTHC OAST A SSET M ANAGEMENT An established leader in the field of tactical investment management, specializing in quantitative research and constructing institutional-caliber portfolios designed for the individual investor. E XPERIENCE. Founded in 1988 $1.8 billion in AUM (as of 3/31/2018) S TABILITY. Proprietary, quantitative, and tactical investment strategies Legacy of preserving capital during the bear markets of and 2008 P ERFORMANCE. Long-term portfolio performance Exclusive Agreement with Investor s Business Daily ETF Partnership with BlackRock ishares Recognized as a Financial Times Top 300 Registered Investment Adviser (2014, 2015) ishares and BlackRock are registered trademarks of BlackRock, Inc. and its affiliates ( BlackRock ) and are used under license. BlackRock makes no representations or warranties regarding the advisability of investing in any product or service offered by NorthCoast Asset Management LLC. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of any product or service offered by NorthCoast. The 2015 Financial Times Top 300 Registered Investment Advisors is an independent listing produced by the Financial Times (June, 2015). The FT 300 is based on data gathered from RIA firms, regulatory disclosures, and the FT s research. As identified by the FT, the listing reflected each practice s performance in six primary areas, including assets under management, asset growth, compliance record, years in existence, credentials and accessibility. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT 300.

3 I NVESTMENT T EAM Patrick Jamin, CFA, FRM Chief Investment Officer Julia Zhu, CFA, FRM SVP Market & Security Research Yaqiu Li, SVP Portfolio Construction Slava Malkin Senior Vice President Partner, Numeric Investors (European / World Fundamental Statistical Arbitrage) Partner, Portfolio Manager, Standard Pacific Capital; Global Long/Short Equity Fund Senior Quantitative Analyst, Invesco; Global Quantitative Fund M.B.A., Harvard Business School, Baker Scholar, Arthur Sachs Scholar M.S. Telecommunications, Ecole Nationale Superieuredes Telecommunications de Paris Ingenieur de I Ecole Polytechnique, Ecole Polytechnique Vice President, Research Affiliates - Quantitative research; equities and asset allocation Associate, First Quadrant Conducted research on GTAA and tactical currency allocation Master of Economics, Yale University, PhD Candidate M.B.A. with concentration in Finance, University of Southern California Climate Modeling National Key Lab of Atmospheric Science, Chinese Academy of Sciences M.S. Quantitative and Computational Finance & M.S. in Statistics, Georgia Tech PhD Candidate CFA Level III Candidate Quantitative currency trading strategies BNP Paribas Portfolio Manager of global macro strategies Research in Global Tactical Asset Allocation strategies Deutsche Asset Management M.S. in Statistics, Harvard University Jason Krugly Vice President Research experience with Bank of America, Merrill Lynch, Credit Suisse, Deutsche Bank M.S. in Financial Engineering, Baruch College B.S. & M.S. in Computer Science, Polytechnic Institute of New York University Sumanth Amarchinta Vice President Senior Investment Analyst, Pyramis Global Advisors - Quantitative research M.S. in Computer Engineering, Rochester Institute of Technology B.S. in Electrical Engineering, Roorkee Indian Institute of Technology 4

4 S TRATEGIES RISK-ADJUSTED GROWTH UPSIDE CAPTURE GROWTH CORE INCOME ALTERNATIVE CAN SLIM CAN SLIM INTERNATIONAL GLOBAL TACTICAL GROWTH U.S. SECTOR SELECT HEDGED INTERNATIONAL SELECT HEDGED TACTICAL GROWTH LEGENDS VALUE VISTA U.S. SECTOR SELECT GLOBAL SELECT INTERNATIONAL SELECT EMERGING MARKET SELECT DIVERSIFIED CORE DIVERSIFIED GROWTH CORE FIXED INCOME TACTICAL INCOME AGGRESSIVE INCOME ZERO BETA Constructing a Customized Portfolio Solution INCOME ALTERNATIVE CORE Enhance client outcomes to specific risk and return needs Risk-adjusted return potential is enhanced when combining strategies with low-cross correlation RISK-ADJUSTED GROWTH UPSIDE CAPTURE Approach diversification in addition to asset class diversification 4

5 ETF STRATEGIES Designed to meet the broad wealth management goals of clients from asset accumulation through retirement Employing a tactical overlay focused on capital appreciation and downside risk management INCOME GROWTH TACTICAL INCOME DIVERSIFIED CORE DIVERSIFIED GROWTH TACTICAL GROWTH Overview A conservative plan, emphasis on income Balanced approach to growth & income Growth by means of capital appreciation and income Capital appreciation with secondary objective of capital preservation Benchmark JPM Global Bond Aggregate (Global Bonds) 50% ACWI / 50% Global Bonds 70% ACWI / 30% Global Bonds Morningstar World Allocation Tactical Shifts 100% (Full) 20% (Modest) 30% (Modest) 100% (Full) Typical Asset Allocation Opportunistic Market Environment Fixed Income U.S. Equity International Equity Alternative The Typical Asset Allocation is for informational and illustrative purposes only based on an Opportunistic market outlook provided by NorthCoast Asset Management. 5

6 T ODAY S Y IELD D ILEMMA Few traditional investment options meet the inflation hurdle Non-traditional yield categories include international bonds, high dividend equities, REITS, and alternative income Combining traditional and nontraditional yieldgenerating investment can improve a portfolio s yield with an acceptable level of volatility Year Treasury Yield (%) Inflation = 3% 3-7 Year Treasury 7-10 Year Treasury Year Treasury MBS 1-3 Year Credit INTERMEDIATE 20+ Year Treasury 10+ Year Credit Standard Deviation (%) International Emerging Market Municipal Bonds Current Yield Generation 12-monthy yield (%) Short-Term TIPS EM Corporate Bonds High Yield Bonds High Yield Short High Yield ex-us High Yield EM US REIT Intal REIT Historical Volatility 3-Year Standard Deviation (%) Cat Bonds HY Bank Loan High Yield Muni Variance Premia Floating Rates Cat Bonds Convertibles Infrastructure EM div International Dividend US Dividend Intal Preferred Preferred Mortgage REIT Intal REIT US REIT High Yield EM High Yield ex-us High Yield Short Term High Yield Bonds EM Corporate Bonds TIPS Short-Term Municipal Municipal Bonds Emerging Market Bonds 3 Year International International Treasury 10+ Year Credit 20+ Year Treasury INTERMEDIATE 1-3 Year Credit MBS Year Treasury 7-10 Year Treasury 3-7 Year Treasury 1-3 Year Treasury Mortgage REIT Preferred Intal Preferred US Dividend International EM div Infrastructure Convertibles Floating Rates Variance Premia High Yield Muni Bank Loan Cat Bonds HY Source: Bloomberg, as of 12/31/

7 I NVESTMENT P ROCESS NorthCoast applies a multi-step investment process to construct, manage and implement its portfolio solutions. Market Outlook ETF Selection Portfolio Construction Risk Management Proprietary market outlook determined by 40+ signals across four dimensions identifies opportunities & risks Daily market signal analysis Ongoing research assessment of market signals ensures accuracy and relevance Rigorous proprietary research shows ETFs exhibit common characteristics before gains Daily scoring of 150+ ETFs with 20+ signals Seeking ETFs with superior risk-adjusted potential Dynamic optimizer properly maintains riskadjusted portfolio daily Assessment of total transaction costs and estimate of implementation shortfall Each ETF s idiosyncrasies evaluated by team prior to taking a position Proprietary risk model Controls embedded through investment process Combination of active and passive risk management methods Daily monitoring of positions Higher concentrated portfolio enhances longterm alpha 7

8 ETF HARMONY - MODERN LOGIC TO ETF SELECTION 10% 8% 6% 4% 2% 0% -2% -4% $3,000 $2,500 NorthCoast ETF Aggregate Score Annualized Return: 12/31/ /31/ % 3.9% -2.4% Top Scoring Universe Bottom Scoring Top Scoring ETFs vs. Bottom Scoring ETFs Total Return: 12/31/ /31/2015 Top Scoring Universe Bottom Scoring Reviewing hundreds of individual factors to find which reward future performance Aggregating factors that target specific aspects of an ETF Optimizing the combination of these factors to increase diversification through an entire market cycle $2,000 $1,500 $1,000 $500 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 The chart above shows a hypothetical simulation of NorthCoast s proprietary ETF scoring system. This simulation is generated by using multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines aggregate ETF scores. It does not represent actual ETF selections. 8

9 TACTICAL I NCOME The NorthCoast Tactical Income ETF Program s investment objective is to provide: Target yield of Inflation + 2-3% through a diverse set of income sources Protection against rising interest rates and inflation with real assets Potential for appreciation through growth assets Downside protection through a tactical allocation to income sources benefitting from diversification Given today s interest rate & yield environment, institutional investors are seeking an active and alternativesolution for portfolio income needs Alternative 0% - 25% Equity 0% - 25% Fixed Income 50% - 100% Emerging Markets 15% - 25% Developed International 15% - 25% United States 50% - 70% Sample Allocation by Asset Class Sample Allocation by Country The allocation above is shown for informational purposes only. It is not a recommendation to buy or sell any of these asset classes. 9

10 D YNAMIC A SSET A LLOCATION 11/1/2012 3/31/2018. The allocation above is shown for informational purposes only. It is not a recommendation to buy or sell any of these asset classes. 10

11 P ERFORMANCE NorthCoast Tactical Income vs. Competitive Benchmarks Hypothetical Growth of $100,000: 11/1/2012-3/31/2018 Tactical Income Global Bond Agg. U.S. Bond Agg. $125,000 $120,000 $115,000 $110,000 $105,000 $100,000 Growth of $100,000 $95,000 Nov 2012 Nov 2013 Nov 2014 Nov 2015 Nov 2016 Nov 2017 $90,000 Annualized Returns 2012* YTD 1-Year 3-Year 5-Year Inception 11/1/2012 Tactical Income ETF 0.8% 1.8% 6.6% -3.5% 6.3% 8.6% -1.3% 4.2% 2.7% 3.1% 3.5% Global Bond Aggregate -0.3% -2.6% 1.7% -2.7% 2.2% 7.1% 1.0% 6.5% 3.0% 1.6% 1.1% U.S. Bond Aggregate 0.0% -2.0% 6.0% 0.6% 2.7% 3.5% -1.5% 1.2% 1.2% 1.8% 1.7% *2012 performance results from 11/1/ /31/2012. Data of 3/31/2018.Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.30% annualized management fee. Please reference the Appendix for additional disclosure information. 11

12 P ERFORMANCE MONTHLY PERFORMANCE (%) NET OF 0.30% MANAGEMENT FEE JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR /1/2012 Total Return & Risk Attributes (11/1/2012 3/31/2018) Total Return Beta Alpha R2 Standard Deviation Sharpe Ratio Correlation Max Drawdown Tactical Income 20.3% % 56.1% 5.2% % Global Bond Aggregate 6.0% % % *2012 performance results from 11/1/ /31/2012. Data of 3/31/2018.Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.30% annualized management fee. Please reference the Appendix for additional disclosure information. 12

13 APPENDIX 13

14 D ISCLOSURE I NFORMATION Past Performance is not indicative of future results. All investments involve risk, including loss of principal. The firm is defined as NorthCoast Asset Management LLC. NCAM was established in 1988 and is an independent Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission (SEC). The firm is a full service investment management company. The firm specializes in quantitative investment programs. NCAM is located in Greenwich, CT, and is not affiliated with any parent organization and has no other offices operating under the same brand name. Returns are presented net-of-fees. Net-of-fee returns are reduced by trading costs and the portfolio s actual management fee. Valuations are computed and performance is reported in U.S. dollars. A complete list of composite descriptions is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. To obtain a compliant presentation for the associated strategy, please contact one of our advisors at Tactical Income is a fully tactical investment strategy designed to produce income while managing principal risk. The strategy invests in a diversified basket of global ETFs across the income spectrum using U.S. bonds, international bonds, corporate bonds, mortgages, and U.S. and international dividend equities. The strategy seeks a target yield of inflation +2-3%, protection against rising interest rates & inflation with real assets, potential for appreciation through growth assets, and downside protection through a tactical allocation to yield sources with diversification benefits. U.S. Bonds = The Barclays Aggregate Bond Index and JP Morgan Global Aggregate Bond Index are used for comparison purposes. The Barclays Aggregate Bond Index is a broad based index designed to represent global investment grade bonds traded in the United States. Global Bonds = The JP Morgan Global Aggregate Bond Index is a broad-based index designed to represent multi-currency, global investment grade bonds. 14

15 D ISCLOSURE I NFORMATION This information contained herein has been prepared by NorthCoast Asset Management, LLC ("NorthCoast") on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. NorthCoast has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information, and are subject to change at any time without notice and with no obligation to update. This material is for informational and illustrative purposes only and is intended solely for the information of those to whom it is distributed by NorthCoast. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of NorthCoast. NorthCoast does not represent, warrant or guarantee that this information is suitable for any investment purpose and it should not be used as a basis for investment decisions. PAST PERFORMANCE DOES NOT GUARANTEE OR INDICATE FUTURE RESULTS. This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The reader should not assume that any investments in companies, securities, sectors, strategies and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. Performance differences for certain investors may occur due to various factors, including timing of investment. Investment return will fluctuate and may be volatile, especially over short time horizons. INVESTING ENTAILS RISKS, INCLUDING POSSIBLE LOSS OF SOME OR ALL OF THE INVESTOR'S PRINCIPAL. The investment views and market opinions/analyses expressed herein may not reflect those of NorthCoast as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies. To the extent that these materials contain statements about the future, such statements are forward looking and subject to a number of risks and uncertainties. 15