Investment Management for Wrangling Unruly Markets

Warning: Shameless Plug to Make Us Some More Dough is Contained in This Post!

You can have the best marketing strategy and the strongest sales skills on earth – but if your client portfolios STINK, it’s gonna be tough building a business with any real value.

So it’s obvious that having killer investment portfolios is helpful for financial advisors.

While this site is dedicated to giving stuff away for free to help advisors grow their business, we can’t share everything.  We can however, help you out in wrangling these crazy markets.  As a lot of our readers know: we run all quantitative portfolios for our clients.  Some are pretty traditional (long only, top down fundamental stuff), while others are incredibly unique.

Today, I’ll share one of our unique portfolios that took over two years to develop and where it fits into a client portfolio and an advisors practice.

We call this FF2.o.

FF2.o is a long-short ETF portfolio built with self tuning algorithms [geek speak].  Self tuning means it adapts automatically to changing market directions and re-optimizes its factor analysis each day.

What it does is study about 3 years of market history each day and mathematically break down the most likely intermediate direction of Large Caps, Mid Caps, and Small Caps.  When a market is bullish we go ultra long via leveraged ETFs and when it’s bearish we go inverse (but not leveraged) via ETFs.

Simple, right?

This has really two key benefits when done correctly:

  1. It’s very unique from a marketing perspective and all clients desire absolute performance whether they admit it or not.
  2. It’s actually very low beta and very uncorellated to the broad market – essentially an alpha producer  in a very general sense [geek speak coming again] – most people totally misunderstand what alpha is – therefore  they say they want it, but have no idea how to really get it or even calculate it.

So by adding a strategy like this to your mix of investments in a client portfolio you are able to basically get new clients and keep them around.  Because of the uniqueness – it also is an automatic referral generating machine and magnet for the HNW set.

In reality, a strategy like this (or any other alternative investing strategy) should not be the core of a client portfolio.  For our clients this will make up less than 10% of most client portfolios.  Remember, it’s a complimentary piece with only 2 real purposes.

Why are we sharing this?

Because we’re making this strategy available for advisors throughout the country via Schwab, TD Ameritrade, Fidelity, and Pershing starting next week.  It’ll be plug and play, automatic trading, performance reporting, billing, etc.

If you like what you see and work with one of those custodians (whether via a b/d or as an RIA), shoot us an email and we can show you how to access it and give some more detail on the mechanics and the like.

If this post does nothing else – let it inspire you create something that accomplishes those two key benefits in your practice that this strategy does for ours.

Have a good weekend,

Jason, Len and JD

Written by jwenk