iQ All Assets Risk On / Risk Off Rotation Model
INVESTMENT OBJECTIVE
The iQ All Assets Risk On Risk Off Rotation Model seeks capital appreciation while focusing on producing long term positive returns regardless of market direction via an "all asset" and "risk on / risk off" approach.
INVESTMENT PROCESS: Multi-Faceted, Elegant & Robust
The iQ All Assets Risk On Risk Off Rotation Model melds asset class rotation with proven monthly risk on / risk off technical strategies.
The Model analyzes 21 risk on/off index ETF strategies, creating artificial indices from their historical returns for technical evaluation. It then picks the top seven strategies based on a multi-factor ranking system consisting of:
8-month price momentum,
9-month high versus 9-month low price,
4-month Alpha (vs. the S&P 500), and
Month-end versus the 12-month high price.
Each strategy, tailored to its underlying ETF, can rotate between long or cash each month, often leading to high cash allocations in turbulent markets.
The indices from which the Model selects its seven strategies are:
Equity
Asia, Latin America, Europe, Nasdaq 100, Equal-Weight S&P 500, S&P 400 Midcap, S&P 600 Small Cap
Bond
Short-Term TIPS, High-Yield & High-Grade Corporate Bonds, 3-7, 7-10, 10-20, and 20+ Year Treasuries.
Alternative
Bitcoin Trust, Crude Oil, Unleaded Gas, Gold, U.S. Dollar, Swiss Franc, Silver
The Model reconstitutes monthly.
IMPORTANT!
The iQ All Assets Risk On Risk Off Rotation Model shows strong metrics and performs well in diverse market scenarios. However, it's essential to note that no investment strategy is immune to short-term volatility. The model's performance might not always align with S&P 500 fluctuations, meaning it can underperform even when the market is up, and vice versa.
Why rotate between asset class strategies?
Rotating between asset classes using proven technical indicators allows tactical adaptation to market shifts. Here's why:
Adapting to Market Changes: Rotation between "risk on" and "risk off" strategies can optimize bullish returns and preserve capital in bearish times.
Guided by Objective Signals: Technical indicators help reduce emotional biases, spotting trend reversals and momentum shifts.
Diversification: Diversifying asset class strategies can provide a more balanced portfolio, suitable for various market environments.
Opportunistic Allocation: Risk on/risk off rotation allows investors to capitalize on emerging opportunities quickly.
Potentially Reducing Losses: In turbulent markets, risk on/off strategies can shift to safer cash equivalents.
Potential Risks: Missing some of the market's best days can impact returns. Monthly rotation strategies might increase transaction costs, especially with ticket charges. Selling positions can also result in tax liabilities for clients.