3Q2014
Quarterly Commentary 3q14
Risk Paradigm Group seeks to defend capital through our ETF tactical strategies both domestically and in the Emerging Markets based upon the F-Squared AlphaSector ® Premium methodology. The below quarterly commentary is related to the RPg AlphaSector ® Core Domestic Equity and the RPg Premium FT portfolios available as separately managed accounts.
Overview
In some ways, the third quarter ended as it began, with market levels generally only modestly changed from three months ago. In other ways, however, it was an eventful quarter. The S&P 500 peaked on September 18th at an all-time high, however in the eight days that followed, the S&P gave back much of its gains, ending barely up for the quarter.
The market driving news of the quarter was unique only in its details. In the U.S., the economy continued to grow at a pace that might be considered disappointing when compared to previous recoveries, but which was relatively healthy as compared to most other regions of the world. The Fed continued its exceptionally well-anticipated tapering, stating that it will officially end quantitative easing in October, but that rates will stay low for a “considerable time.” Internationally, the war in the Ukraine cooled off somewhat, as the one in
Syria and Iraq flared up. Scotland decided to stay in the United Kingdom after all. And at the very end of the quarter, protests erupted in Hong Kong.
The AlphaSector Premium Index (“the Index”) started the quarter bullishly positioned with eight sectors allocated and only one sector, consumer discretionary, excluded. As the quarter progressed however, the market became less settled and the Index removed two additional sectors until volatilities receded and the Index allocated back into eight sectors, with only utilities excluded. At the end of September, the Index turned off energy, leaving allocation to seven out of nine sectors at the quarter’s close, a modestly optimistic stance.
Outlook
Subjective forecasts of market outlook do not have a role in the AlphaSector quantitative methodology. As a result, it is not appropriate to make formal projections about the direction of the market and offer no opinion on the near or long-term future of the equity markets.
The Index ended the quarter with allocations to seven of a possible nine sectors in our quantitative model. This moderately bullish stance reflects a minor change from the eight sectors that were allocated to when the quarter began. By design, these model scores can change abruptly, and it is conceivable that some or all of the sectors now scoring positively could score negatively and be removed from the portfolio in the near future. Whether the portfolio takes on a more defensive or aggressive posture in the coming months remains to be seen.
Commentary Disclosure
Past performance is not indicative of future results. It is not possible to invest directly in an index. This material has been prepared solely for informative purposes. The information contained herein includes information that has been obtained from third party sources and has not been independently verified. It is made available on an "as is" basis without warranty. Any projections, market outlooks, or estimates n this presentation are forward-looking statements and are based upon certain assumptions and should not be construed as indicative of actual events that will occur. The information provided herein does not constitute investment advice and is not a solicitation to buy or sell securities.
Risk Paradigm Group, LLC. d/b/a RPg Asset Management is a registered investment advisor with U.S. Securities and Exchange Commission (“SEC”). Additional information regarding Risk Paradigm Group, LLC can be found on our website at www.rpgassetmanagement.com.
“AlphaSector ®” is a registered trademark of F-Squared Investments, Inc. and is used with permission. This material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from Risk Paradigm Group, LLC and F-Squared Investment Management, LLC or one of its subsidiaries (collectively, “F-Squared Investments” or “F-Squared”). F-Squared reserves the right at any time and without notice to change, amend, or cease publication of the information.
Investment products that may be based on AlphaSector Indexes are not sponsored by F-Squared, and F-Squared does not make any representation regarding the advisability of investing in them. F-Squared serves as the model provider to RPg Asset Management. There is no guarantee that an investor’s account will achieve its objectives or avoid losses. Inclusion of a mutual fund or an exchange traded fund in an index does not in any way reflect an opinion of F-Squared regarding the investment merits of such a fund, nor should it be interpreted as an offer of such a fund’s securities. None of the mutual funds or exchange traded funds included in an index has given any real or implied endorsement or support to F-Squared or to this index.
All AlphaSector Indexes represented in this material do not reflect the actual trading of any client account. No representation is being made that any client will or is likely to achieve results similar to those presented herein. F-Squared Investment Management, LLC or one of its subsidiaries is the source and the owner of all AlphaSector Indexes, and their performance information.
The AlphaSector U.S. Equity Index (“U.S. Equity”) is designed to provide exposure to the U.S. Equity market, and is constructed as an “asset allocation” overlay onto Exchange Traded Funds (“ETFs”) representing major sectors of the U.S. economy. F-Squared defines the inception date for U.S. Equity, the Premium AlphaSector Index and the AlphaSector Rotation Index as October 1, 2008.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
References to Non-AlphaSector Indexes
The S&P 500 Index is a broad-based unmanaged index of 500 stocks, which is widely recognized as a representative of the equity market in general.
Sources: Morningstar, F-Squared Investments. All rights reserved.
For more information including risks of investing in our strategies, visit our website at www.rpgassetmanagement.com
For more information on F-Squared and the AlphaSector Indexes, please visit www.f-squaredinvestments.com