Prepared By: David Advisor Prepared for: Joe Investor Content Investment philosophy Risk preference Asset mix History performance Portfolio constitution Disclaimer Date: 2009 10 2
RiskFile Porfolio Composer: construct adaptive optimal portfolios RiskFile ETF Portfolio program is designed to engineer low cost, passive indexing investments (ETFs) into an active managed portfolio targeted superior risk adjusted returns. Its investment strategy is characterized by the following principles: 1) Radical diversification Investors benefit from a clear portfolio organization with radically diversified asset classes, including: Cash Sectors and Industries Bonds Gold Domestic Equity Real Estate Global Equity Commodity Emerging Market Reverse ETFs 2) Laser accurate matching with investor s risk preferences RiskFile s view is that traditional mean variance algorithms do not work. Our proprietary algorithm is designed to balance the tradeoffs between minimizing the risks of losing money and the risks of underperformingthe benchmarks. Based on newest acedemic development, the mathematic model fully considers the complicated interactive relationship of the diversified asset classes to achieve the most required balance. Major characteristics: The resulted portfolios make sense. Our model is not highly sensitive to the minor changes of the return/risk assumptions and does not generate extreme, unrealistic portfolios. It responds to investor's risk preference and produces portfolios accurately matching their choices. Optimized Portfolio Macro Economic Projection Capital Market Forecasting Constructing Algorithm Auto reaction pattern analysis 16,000 scenario test Comparable history analysis Markets valuation level analysis Surprise analysis Return per unit of risk Minimize absolute and relative risk 3) Responding to the changes in the macro economy/capital markets In assessing the relative risk of different asset classes, RiskFile model first forms a framework of the directions of the global economy and capital markets. This is done by our proprietary Macro Reaction Pattern Analysis, as shown above. Then relative expected returns of the different asset classes are incorporated into the portfolio construction. This way, the portfolios are designed to respond to the changes of the investment environment and to be managed actively. 2009-10-2 Description
Question Q1. Portfolio Size Q2. Expected Return Q3. Risk Tolerance Q4. Macro Mgmt Q5. Tactical Mgmt Q6. Active Mgmt Size of the portfolio Choose from 1 10: prefer high return/high volatility Choose from 1 10: prefer capital safety/low return Choose from 1 10: responds to macro situation Choose from 1 10: responds to tactical situation Choose from 0~4: active exposure in bond, sector and country Answer Notes $2,500,000 6 4 5 1 3 $2,500,000 Reasonable volatility, reasonable return Certain chance of lossing money Responding to the macro situation Little respond to the tactical situation Selecting bond, sector and developed ETFs *: Inputs updated on: Based on investment preference, efficient portfolio is changing accordingly, as shown below: Gold US Equity Global Equity Emerging Equity REITs Commodity 6.5% Return Weights% 6 Bond Efficient Portfolio, 8.8%, 6. 6. 5 5.5% 4 3 September 09 60/40 Traditional Portfolio, 12.1%, 5.7% 5. 4.5% Conservative 2009-10-2 Risk Preference Aggressive Risk 4. 4% 6% 8% 12% 14% Preference
The output asset allocation based on information provided: Asset Fund Class Percent Percent Bond Bond 24% 24% Gold Gold 17% 17% Real Estate REITs Commodity Commodity Equity US Equity 21% 4 Global Equity 15% EM 4% Sum 10 10 Commodity, REITs, Gold, 17% Other, 4 Bond, 24% Asset Mix US Equity, 21% Global Equity, 15% EM, 4% 10 8 6 4 Return per unit of Risk Risk measured as Volitality 25% 15% 25% 15% Expected Risk Risk/Return Scatter Bond Gold US Equity Global Equity Emerging Equity REITs Commodity 5% 5% Expected Return 4% 5% 6% 7% 8% Bond Gold Domestic Equity Global Equity Emerging Equity REITs Commodity 2009-10-2 Allocation
Historical Return: Individual Asset Class Historical Return: Portfolio 4 Returns in Bull Cycle Returns in Bear Cycle Portfolio Benchmark (60/40 Portfolio) 135% 1 3 105% 9 75% 6 45% 3 15% 15% 3 Bond Gold USEquity EAFE 1 EM 2 REIT Commodity Benchmark Portfolio Mar 99 Sep 99 Mar 00 Sep 00 Mar 01 Sep 01 Mar 02 Sep 02 Mar 03 Sep 03 Mar 04 Sep 04 Mar 05 Sep 05 Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 *: Banchmark: 6SPX+ 4 AGG *: Based on data of 2009 9 30 Mar 09 Sep 09 3 2009-10-2 Performance
Asset Class ETF Name % Shares Asset Class ETF Name % Shares Bond BND Vanguard total Bond 14.2% 4,610 Commodity OIL IPATH CRUDE OIL 1.5% 1550 HYG iboxx $ High Yield 3.1% 1,010 MUB S&P National Muni 3.1% 790 BWX S&P Intl Treasury 3.1% 1,460 Gold GDX MKT VECT GOLD MNRS 8.4% 5,480 GLD SPDR GOLD SHARES 8.4% 2,290 US Equity SPY SPDR S&P 500 16.4% 4,470 XLF SPDR Financial 0.6% 1,310 XLE SPDR Energy 0.6% 310 XLY SPDR Consumer Disc 0.3% 380 XLK SPDR Technology 0.8% 1,150 XLV SPDR Health Care 0.5% 450 XLB SPDR Materials 0.2% 150 XLI SPDR Industrial 0.5% 530 XLP SPDR Consumer Staples 0.4% 480 XLU SPDR Utilities 0.2% 140 Global Equity EFA MSCI EAFE 12.3% 6,550 EWD ishare MSCI SWEDEN 1. 1,410 EWL ishare MSCI SWITZRLD 1. 1,430 EWA ishares MCSI AUSTRALIA 1. 1,520 Portfolio Characteristics Emerging Market EEM MSCI Emerging Market 3.8% 2,990 Positions 25 Avg MER 0.36% REITs IYR ishare US REITs 9.9% 7,580 Annual Turnover 17% Avg Yield 3.3% Commodity DBC PowerShares Commodity 7. 7,500 Top Positions SPY BND EFA IYR GDX DBB PowerShares Base Metals 1.5% 2,450 Percentage 16.4% 14.2% 12.3% 9.9% 8.4% Performance Bull/Bear Cycle Avg Bull% Bear% 3 Mon% 1 Yr% 3 Yr% 5 Yr% 10 Yr% Risk Chance to Loss$ Benchmark 1.2% 9.7% 12.1% 10.8% 11.6% 2.7% 1.2% 0.7% 13.4% 48% Portfolio 4.4% 13.7% 5. 11.8% 13.2% 5.8% 9.8% 6.1% 13.7% 33% 2009-10-2 Portfolio
Asset Class ETF Name % Shares Asset Class ETF Name % Shares Bond BND 14.2% Commodity OIL IPATH CRUDE OIL 1.5% 1550 HYG 3.1% MUB 3.1% BWX 3.1% Gold GDX 8.4% GLD 8.4% US Equity SPY 16.4% XLF 0.6% XLE 0.6% XLY 0.3% XLK 0.8% XLV 0.5% XLB 0.2% XLI 0.5% XLP 0.4% XLU 0.2% Global Equity EFA 12.3% EWD 1. EWL 1. EWA 1. Emerging Market EEM 3.8% REITs IYR 9.9% Commodity DBC 7. DBB 1.5% 2,450 You could use this page to customize the portfolio. For example, you may use mutual funds as the building blocks, substituting ETFs correspondingly. Simply input the names of the funds in the table on the left and above. Performance Bull/Bear Cycle Avg Bull% Bear% 3 Mon% 1 Yr% 3 Yr% 5 Yr% 10 Yr% Risk Chance to Loss$ Benchmark 1.2% 9.7% 12.1% 10.8% 11.6% 2.7% 1.2% 0.7% 13.4% 48% Portfolio 4.4% 13.7% 5. 11.8% 13.2% 5.8% 9.8% 6.1% 13.7% 33% 2009-10-2 Customize
Historical Return: Individual Asset Class Historical Important Return: Disclaimer Portfolio The information in this package is not intended to be a substitute for professional advice. The projections herein are based on multiple assumptions about personal circumstances and investment returns. These projections are extremely sensitive to changes in the inputs, including your age, the initial investment size, investment currency, your risk tolerance level, your investment style and your tax concern. Inputs used for investment returns, volatilities and up/down opportunities, are simple assumptions only and should in no way be construed as a guarantee or promise of future returns. This package attempts to ensure but not guarantee that all information provided herein is current and accurate. Due to this, and to the nature of the information, it should not be relied upon for decision making without professional advice. The information presented here is provided on an "as is" basis, and the user of the information assumes the entire risk of any use made of this information. Neither RiskFile nor any other party makes any express or implied warranties or representations with respect to this information (or the results to be obtained by the use thereof), and RiskFile hereby expressly disclaims all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall RiskFile or any other party have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. This software is the exclusive property of RiskFile and may not be reproduced or re disseminated in any form without prior written permission from RiskFile. 2009-10-2 Disclaimer