Download Innealta Capital: Home

Innealta Capital Tactical ETF Portfolio Series
Global All Asset
January 2015
Global All Asset Conservative Investment Objective
Current income and some capital appreciation
Global All Asset Conservative Investment Strategy
The Global All Asset Portfolios employ a quantitative framework based on economic, fundamental, risk and technical analyses that evaluate the risk/reward potential of investing in equity asset
classes relative to fixed income. Bullish or bearish signals generated by the quantitative model are used to tactically adjust equity exposure within each portfolio by +/- 20% relative to the secular
tactical asset allocation target in order to try to capture enhanced risk-adjusted returns. During bearish market environments, equity asset class exposures are reduced and the resulting capital
is proportionately distributed to the fixed income and other asset class portion of the portfolio. Conversely, during bullish market environments, equity asset class exposures are increased and
the allocations towards fixed income and other asset classes are proportionately reduced.
The fixed income component is an actively managed portfolio of fixed income ETFs based on a classical constrained optimization approach for fixed income asset classes. The portfolio aims to
generate above-average yield with strict risk controls by investing in those fixed income sectors that we believe have favorable risk-adjusted performance potential and eligible ETF representation.
The Global All Asset Portfolios may include asset classes other than equity and fixed income (e.g. Real Estate) for alternative sources of diversification and portfolio income, as identified by our
secular tactical asset allocation analyses.
Global All Asset Conservative Portfolio Performance*
Risk/Reward vs. Benchmark*
12.92
12.92
12.77
0.63
0.45
0.19
1.87
2.64
3.45
2.18
5%
3.45
4.04
5.26
5.87
Return
7.43
10%
9.10
9.58
12.77
Portfolio
15%
0%
2010
2011
2012
Global All Asset Conservative (Gross)
Global All Asset Conservative (Net)
2013
2014
YTD
1 Year
3 Year
5 Year
Inception
0.45
4.63
4.97
7.78
7.41
Conservative (Net of Fee)
0.19
0.19
3.58
4.61
7.19
6.83
40% MSCI ACWI ex U.S. / 60% Barclays Agg
0.63
0.63
6.69
6.48
6.99
6.70
Inception date for the portfolio is December 31, 2009.
Global All Asset Conservative Portfolio Current Allocation*
Cash (2.0% of total)
Commodities (4.9% of total)
Equity (26.0% of total)
Fixed Income (61.1% of total)
REIT (6.0% of total)
Global All Asset Conservative Secular Tactical Target Allocation*
Fixed Income (58.0% of total)
−0.98
0.00
Beta
1.26
1.00
Std Dev
7.76
5.31
R−Squared
0.75
1.00
Tracking Error
0.53
0.00
Upside Capture
1.46
1.00
Downside Capture
1.09
1.00
Sharpe Ratio
0.88
1.19
Sortino Ratio
1.28
1.74
Information Ratio
0.13
NA
84.71
0.45
Equity (29.0% of total)
6.70
Alpha (ann.)
Ann. Turnover Ratio (%)
Benchmark: 40% MSCI ACWI ex U.S. / 60% Barclays Agg
QTR
Commodities (5.0% of total)
6.83
Portfolio Statistics*
YTD
Conservative (Gross of Fee)
Cash (2.0% of total)
Benchmark
Total Return
Yield to Maturity
Avg. Duration
4.14
3.64
Global All Asset Conservative Portfolio Holdings*
Percent
Net Assets
SPDR Barclays Short Term High Yield Bond (SJNK)
10.50%
iShares Barclays MBS Bond (MBB)
8.69%
Vanguard Interm−Term Corp Bond (VCIT)
8.62%
Market Vectors Emerging Markets High Yield Bond (HYEM)
7.58%
iShares Floating Rate Note (FLOT)
6.77%
SPDR S&P 500 (SPY)
5.55%
Vanguard Short−Term Bond (BSV)
5.50%
iShares Barclays TIPS Bond (TIP)
5.07%
PowerShares DB Commodity Fund (DBC)
4.91%
iShares Emerging Markets High Yield Bond (EMHY)
4.22%
PIMCO 0−5 Year High Yield Corporate Bond (HYS)
4.18%
Vanguard FTSE Emerging Markets (VWO)
4.02%
iShares Russell 2000 (IWM)
3.56%
Vanguard FTSE Pacific (VPL)
3.20%
Vanguard REIT (VNQ)
3.02%
iShares MSCI Frontier 100 (FM)
3.01%
Vanguard Global ex−U.S. Real Estate (VNQI)
2.96%
iShares Core S&P Mid−Cap (IJH)
2.54%
iShares MSCI Pacific ex−Japan (EPP)
2.43%
Cash
2.01%
Vanguard FTSE Europe (VGK)
1.65%
*Data is shown as supplemental information to the Composite. Fund holdings are
subject to change. Risk/reward statistics calculated using daily data. SOURCE:
Innealta Capital using data from Bloomberg and Morningstar
REIT (6.0% of total)
AF88128
084-AFAM-2/11/2015
Innealta Capital Tactical ETF Portfolio Series
Global All Asset
January 2015
Global All Asset Moderate Investment Objective
Capital appreciation and income
Global All Asset Moderate Investment Strategy
The Global All Asset Portfolios employ a quantitative framework based on economic, fundamental, risk and technical analyses that evaluate the risk/reward potential of investing in equity asset
classes relative to fixed income. Bullish or bearish signals generated by the quantitative model are used to tactically adjust equity exposure within each portfolio by +/- 20% relative to the secular
tactical asset allocation target in order to try to capture enhanced risk-adjusted returns. During bearish market environments, equity asset class exposures are reduced and the resulting capital
is proportionately distributed to the fixed income and other asset class portion of the portfolio. Conversely, during bullish market environments, equity asset class exposures are increased and
the allocations towards fixed income and other asset classes are proportionately reduced.
The fixed income component is an actively managed portfolio of fixed income ETFs based on a classical constrained optimization approach for fixed income asset classes. The portfolio aims to
generate above-average yield with strict risk controls by investing in those fixed income sectors that we believe have favorable risk-adjusted performance potential and eligible ETF representation.
The Global All Asset Portfolios may include asset classes other than equity and fixed income (e.g. Real Estate) for alternative sources of diversification and portfolio income, as identified by our
secular tactical asset allocation analyses.
12.39
2010
2012
Global All Asset Moderate (Gross)
Global All Asset Moderate (Net)
2013
2014
−0.10
−0.03
2011
−0.34
2.26
4.90
6.19
5.35
11.49
−3.5%
−0.85
−0.36
1.5%
1.23
14.97
13.99
14.91
6.4%
1.47
Return
11.5%
Risk/Reward vs. Benchmark*
Portfolio
10.82
16.4%
14.91
Global All Asset Moderate Portfolio Performance*
6.65
7.48
Alpha (ann.)
−1.52
0.00
Beta
1.24
1.00
Std Dev
11.51
8.16
R−Squared
0.78
1.00
Tracking Error
0.84
0.00
Upside Capture
1.53
1.00
Downside Capture
1.04
1.00
Sharpe Ratio
0.61
0.87
Sortino Ratio
0.87
1.25
Information Ratio
−0.01
NA
Portfolio Statistics*
YTD
Ann. Turnover Ratio (%)
Benchmark: 60% MSCI ACWI ex U.S. / 40% Barclays Agg
45.47
QTR
YTD
1 Year
3 Year
5 Year
Inception
Moderate (Gross of Fee)
−0.03
−0.03
5.36
5.87
8.34
7.66
Moderate (Net of Fee)
−0.34
−0.34
4.19
4.92
7.30
6.65
60% MSCI ACWI ex U.S. / 40% Barclays Agg
−0.10
−0.10
6.73
8.14
8.04
7.48
Inception date for the portfolio is December 31, 2009.
Global All Asset Moderate Portfolio Current Allocation*
Cash (2.0% of total)
Commodities (6.9% of total)
Equity (39.7% of total)
Fixed Income (43.2% of total)
REIT (8.2% of total)
Global All Asset Moderate Secular Tactical Target Allocation*
Cash (2.0% of total)
Benchmark
Total Return
Yield to Maturity
Avg. Duration
4.32
3.27
Global All Asset Moderate Portfolio Holdings*
Percent
Net Assets
SPDR Barclays Short Term High Yield Bond (SJNK)
10.89%
Market Vectors Emerging Markets High Yield Bond (HYEM)
10.87%
SPDR S&P 500 (SPY)
8.61%
iShares Floating Rate Note (FLOT)
7.20%
PowerShares DB Commodity Fund (DBC)
6.89%
iShares Russell 2000 (IWM)
5.98%
iShares Barclays MBS Bond (MBB)
5.70%
Vanguard FTSE Emerging Markets (VWO)
5.65%
Vanguard Interm−Term Corp Bond (VCIT)
5.11%
iShares MSCI Pacific ex−Japan (EPP)
4.39%
iShares Core S&P Mid−Cap (IJH)
4.20%
Vanguard REIT (VNQ)
4.13%
Vanguard Global ex−U.S. Real Estate (VNQI)
4.07%
Vanguard FTSE Pacific (VPL)
4.04%
iShares MSCI Frontier 100 (FM)
4.03%
iShares Barclays TIPS Bond (TIP)
3.39%
Vanguard FTSE Europe (VGK)
2.85%
Cash
2.00%
*Data is shown as supplemental information to the Composite. Fund holdings are
subject to change. Risk/reward statistics calculated using daily data. SOURCE:
Innealta Capital using data from Bloomberg and Morningstar
Commodities (7.0% of total)
Equity (45.0% of total)
Fixed Income (38.0% of total)
REIT (8.0% of total)
AF88128
084-AFAM-2/11/2015
Innealta Capital Tactical ETF Portfolio Series
Global All Asset
January 2015
Global All Asset Growth Investment Objective
Long-term capital appreciation
Global All Asset Growth Investment Strategy
The Global All Asset Portfolios employ a quantitative framework based on economic, fundamental, risk and technical analyses that evaluate the risk/reward potential of investing in equity asset
classes relative to fixed income. Bullish or bearish signals generated by the quantitative model are used to tactically adjust equity exposure within each portfolio by +/- 20% relative to the secular
tactical asset allocation target in order to try to capture enhanced risk-adjusted returns. During bearish market environments, equity asset class exposures are reduced and the resulting capital
is proportionately distributed to the fixed income and other asset class portion of the portfolio. Conversely, during bullish market environments, equity asset class exposures are increased and
the allocations towards fixed income and other asset classes are proportionately reduced.
The fixed income component is an actively managed portfolio of fixed income ETFs based on a classical constrained optimization approach for fixed income asset classes. The portfolio aims to
generate above-average yield with strict risk controls by investing in those fixed income sectors that we believe have favorable risk-adjusted performance potential and eligible ETF representation.
The Global All Asset Portfolios may include asset classes other than equity and fixed income (e.g. Real Estate) for alternative sources of diversification and portfolio income, as identified by our
secular tactical asset allocation analyses.
16.29
17.51
Portfolio
8.58
−7.6%
2010
−0.83
−4.03
−1.81
−3.87
−2.5%
−0.37
2.5%
−0.73
1.41
4.53
7.5%
0.71
Return
8.58
12.5%
Risk/Reward vs. Benchmark*
13.83
16.29
15.43
11.85
17.4%
15.43
Global All Asset Growth Portfolio Performance*
2011
2012
Global All Asset Growth (Gross)
Global All Asset Growth (Net)
2013
2014
Benchmark
Total Return
6.86
8.14
Alpha (ann.)
−1.29
0.00
Beta
1.13
1.00
Std Dev
14.20
11.21
R−Squared
0.80
1.00
Tracking Error
1.54
0.00
Upside Capture
1.24
1.00
Downside Capture
1.01
1.00
Sharpe Ratio
0.53
0.71
Sortino Ratio
0.76
1.00
Information Ratio
−0.06
NA
Portfolio Statistics*
YTD
Ann. Turnover Ratio (%)
Benchmark: 80% MSCI ACWI ex U.S. / 20% Barclays Agg
Yield to Maturity
123.42
QTR
YTD
1 Year
3 Year
5 Year
Inception
Growth (Gross of Fee)
−0.37
−0.37
5.83
6.45
8.41
7.53
Growth (Net of Fee)
−0.73
−0.73
4.88
6.07
7.73
6.86
80% MSCI ACWI ex U.S. / 20% Barclays Agg
−0.83
−0.83
6.77
9.78
8.98
8.14
Inception date for the portfolio is December 31, 2009.
Global All Asset Growth Portfolio Current Allocation*
Cash (1.6% of total)
Commodities (8.9% of total)
Equity (54.2% of total)
Fixed Income (25.2% of total)
REIT (10.1% of total)
Global All Asset Growth Secular Tactical Target Allocation*
Avg. Duration
5.89
2.60
Global All Asset Growth Portfolio Holdings*
Percent
Net Assets
SPDR Barclays Short Term High Yield Bond (SJNK)
10.49%
Market Vectors Emerging Markets High Yield Bond (HYEM)
9.91%
Vanguard FTSE Emerging Markets (VWO)
9.69%
SPDR S&P 500 (SPY)
9.53%
PowerShares DB Commodity Fund (DBC)
8.85%
iShares Russell 2000 (IWM)
7.15%
iShares Core S&P Mid−Cap (IJH)
6.02%
iShares MSCI Pacific ex−Japan (EPP)
5.73%
Vanguard FTSE Pacific (VPL)
5.65%
Vanguard FTSE Europe (VGK)
5.42%
Vanguard Global ex−U.S. Real Estate (VNQI)
5.10%
Vanguard REIT (VNQ)
5.03%
iShares MSCI Frontier 100 (FM)
5.03%
iShares Floating Rate Note (FLOT)
4.80%
Cash
1.60%
*Data is shown as supplemental information to the Composite. Fund holdings are
subject to change. Risk/reward statistics calculated using daily data. SOURCE:
Innealta Capital using data from Bloomberg and Morningstar
Cash (2.0% of total)
Commodities (9.0% of total)
Equity (61.0% of total)
Fixed Income (18.0% of total)
REIT (10.0% of total)
AF88128
084-AFAM-2/11/2015
Innealta Capital Tactical ETF Portfolio Series
Global All Asset
January 2015
About Innealta Capital
Contact Information
Innealta Capital is a quantitative asset management firm specializing in the active management of Exchange Traded Fund (ETF) portfolios. Innealta Capital
Innealta is a division of AFAM Capital, a privately held company founded in 1977, and has over $3 billion in Assets Under Management 12117 FM 2244 | Building 3, Suite 170
and Advisement.
Austin, TX 78738
Innealta’s competitive advantage is its quantitative investment strategy driven by a proprietary econometric model, which was created P: 512.354.7041 & 888.994.6837
by the company’s founder and Chief Investment Officer, Dr. Jeff Buetow. The investment management team’s focus is to capitalize on F: 512.402.1014
[email protected] | innealtacapital.com
attractive market environments for ETFs, tactical strategies, and low cost portfolio alternatives.
Investment Professionals
Gerald Buetow, Ph.D., CFA
Chief Investment Officer
Brian Henderson, Ph.D., CFA
Senior Research Analyst
Mark Mowrey, CFA
SVP, Product Manager
Jason Clark, CFA
VP, Senior Portfolio Manager
Matt Wieand
AVP, Senior Trader
Composite Performance
Strategy
Year
Total Firm Composite
Number of
Assets
Assets
Accounts
(Millions)
(Millions)
Composite
Gross Return
(Percent)
Composite Benchmark
Net Return
Return
(Percent)
(Percent)
Composite
3−Yr St Dev
(Percent)
Benchmark
3−Yr St Dev
(Percent)
Composite Wrap Fee Paying Non−Fee Paying
Dispersion
Accounts
Accounts
(Percent)
(Percent)
(Percent)
Conservative
2014
827
169
1
2.64
1.87
5.26
NA
4.67
NA
100.00
0.00
Conservative
2013
788
41
1
3.45
3.45
7.43
7.54
5.63
0.00
0.00
0.00
Conservative
2012
676
40
1
12.92
12.92
9.10
7.99
5.78
0.00
0.00
<1
Conservative
2011
476
354
7
5.87
4.04
2.18
NA
NA
0.26
90.05
<1
Conservative
2010
486
33
<5
12.77
12.77
10.07
NA
NA
NA
0.00
<1
Moderate
2014
827
305
2
2.26
1.23
4.90
7.62
8.57
NA
0.00
0.00
Moderate
2013
788
324
3
6.19
5.35
12.39
10.37
8.34
0.30
0.00
0.00
Moderate
2012
676
178
2
14.97
13.99
11.49
11.80
8.63
0.07
0.00
<1
Moderate
2011
476
1,074
18
1.47
−0.36
−0.85
NA
NA
0.35
84.45
<1
Moderate
2010
486
31
<5
14.91
14.91
11.72
NA
NA
NA
0.00
<1
Growth
2014
827
189
2
1.41
0.71
4.53
9.20
6.55
NA
0.00
0.00
Growth
2013
788
233
3
8.58
8.58
17.51
12.31
11.20
0.00
0.00
0.00
Growth
2012
676
33
1
16.29
16.29
13.83
14.41
11.63
0.00
0.00
<1
Growth
2011
476
962
14
−1.81
−3.87
−4.03
NA
NA
0.18
97.09
<1
Growth
2010
486
29
<5
15.43
15.43
13.17
NA
NA
NA
0.00
<1
NA: Data is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Composite dispersion is presented asset-weighted and gross-of-fees.
Disclosures & Important Information
AFAM Capital Inc. (AFAM) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. AFAM has been independently
verified for the periods January 1, 1996 through September 30, 2014 by Ashland Partners & Company LLP. A copy of the verification report is available upon request. Verification assesses whether (1) the firm has
complied with all the composite construction requirements of the GIPS®standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the
GIPS®standards. Verification does not ensure the accuracy of any specific composite presentation. The firm maintains a complete list and description of composites, which is available upon request. The firm had total
assets under management of $827 million as of December 31, 2014. The composites were created December 31, 2009. Minimum account size for inclusion in the composite is $50,000. Prior to June 30, 2014 the
minimum account size for the composite was $20,000.
The Global All Asset Conservative, Global All Asset Moderate and Global All Asset Growth Composites include discretionary portfolios using the tactical ETF Global All Asset strategies that are based on a quantitatively
driven, tactical asset allocation approach that apportions portfolio assets to five individual equity classes based on the specific risk/reward characteristics of each. Dollars not allocated to equities are invested in a basket of
primarily fixed-income ETFs. Composite policy requires the temporary removal of any portfolio incurring an aggregate net cash flow of at least 25% of portfolio assets for any given month. Such a temporary removal of an
account occurs at the beginning of the month in which the significant cash flow occurs and the account re-enters the composite at the beginning of the month after a net cash outflow and the beginning of the next quarter
after a net cash inflow. Additional information regarding the treatment of significant cash flows is available upon request. As of June 30, 2014 the composite was redefined to include accounts that may utilize margin.
This was done to encompass all accounts that follow the advisors strategy.
Past performance is not indicative of future results. The U.S. Dollar is the currency used to express performance. The composites include portfolios charged bundled or wrap fees and portfolios charged transaction fees
or trading costs. Bundled fee portfolios pay a fee based on a percentage of assets under management in place of a transaction fee. They include the advisor’s fee and, in most cases, also include a fee for investment
management and portfolio monitoring. Portfolios eligible for these composites must follow the stated strategy. Live returns are presented net of management fees and include the effects of trading costs and reinvestment
of all income. Net of fee performance was calculated using actual management fees charged to the client. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon
request. Actual investment management fees will vary, beginning at 1.5% per annum. Our full management fee schedule is described in more detail in Form ADV Part 2A.
Any investment is subject to risk. Exchange traded funds (ETFs) are subject to risks similar to those of stocks, such as market risk, and investors who have their funds invested in accordance with the portfolios may
experience losses. Additionally, fixed income (bond) ETFs are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. For more
information on the risks associated with investment in ETFs, please refer to AFAM Capital’s Form ADV Part 2A. Diversification does not protect against loss in declining markets.
Effective Dec. 31, 2014, the composites were renamed Global All Asset Conservative, Global All Asset Moderate and Global All Asset Growth. Formerly, the composites were labeled Risk Based Core ETF-Conservative, Risk
Based Core ETF – Moderate, and Risk Based Core ETF – Growth. Effective Dec. 31, 2011, the benchmarks changed to a blend of 40% MSCI ACWI NR and 60% Barclays Capital US Aggregate (Conservative), 60% MSCI
ACWI NR and 40% Barclays Capital US Aggregate (Moderate), and 80% MSCI ACWI NR and 20% Barclays Capital US Aggregate (Growth). Prior to that, the benchmarks consisted of 26% Russell 3000, 14% MSCI EAFE,
and 60% Barclays Capital US Aggregate (Conservative), 41% Russell 3000, 19% MSCI EAFE, and 40% Barclays Capital US Aggregate (Moderate), and 56% Russell 3000, 24% MSCI EAFE, and 20% Barclays Capital US
Aggregate (Growth). The Advisor believes the revised benchmarks more fully reflect the breadth of the investment opportunity set. Blended benchmarks are calculated daily and rebalanced quarterly. The MSCI ACWI Index
is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24
developed and 21 emerging market country indices. The Barclays Capital Aggregate Bond Index covers the U.S.-dollar-denominated, investment-grade, fixed-rate, taxable bond market of SEC-registered securities. Blended
benchmarks are compounded daily and rebalanced quarterly.
Alpha is a measure of the difference between a portfolio’s actual returns and its expected performance, given its level of risk as measured by beta. Beta is a measure of volatility, or systematic risk, of a portfolio in comparison
to a benchmark. A beta greater than one indicates more volatility, while a beta less than one indicates less volatility than the relevant benchmark. Annualized Standard Deviation is a measure of the dispersion of investment
returns from the mean. A higher standard deviation indicates higher volatility. Sharpe Ratio is a measurement of reward per unit of risk as calculated by the average monthly excess return divided by the monthly standard
deviation of excess returns. R Squared is a measure of how close the relationship is between a portfolio and its benchmark. Tracking Error is a measure of the volatility of excess returns relative to a benchmark. Information
ratio is a measure of risk-adjusted performance.
AFAM Capital is a Registered Investment Advisor. Innealta Capital is a division of AFAM Capital. AFAM is editor of The Prudent Speculator newsletter and is the Investment Advisor to certain no-load proprietary mutual
funds and individually managed client accounts. Registration of an investment adviser does not imply any certain level of skill or training.
AF88128
084-AFAM-2/11/2015