4Q2013

Quarterly Commentary 4q13

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 
For the 4th quarter, the AlphaSector Premium Index was fully invested in seven or eight of the nine U.S. equity sectors with no short term treasury ETF. Consumer Staples was absent from the Index for most of October.  The AlphaSector Premium Index ended 2013 with eight of nine sectors active, with only Utilities omitted from mid-October through the end of the year. 

The AlphaSector Premium Index was fully allocated in U.S. equity without any short term treasury ETF deployed for the entirety of 2013. The Index held all nine sectors for five months, from the end of January to the beginning of July, and at no point holding fewer than seven sectors.

Market Environment 
It may not have felt very comfortable at the time, but it is clear that in the future 2013 will be looked back on warmly. The S&P 500 finished the year up with its best annual performance in 16 years, and the third best since 1980.  Perhaps what was most notable about the U.S. equity returns for 2013 was the absence of a definitive catalyst. 

Stocks were driven up over the year less by the appearance of good news than by the failure of anticipated disasters to materialize. Those inclined to see the glass half full might argue that the market will experience an even bigger rally when, inevitably, authentic positive developments appear, while the glass-half-empty crowd might retort that all-time highs based on U.S. equities being the least bad option for investors is a fragile state of affairs.

Outlook 
AlphaSector is a quantitative model that uses historical data. As a result, it is not appropriate to make formal projections about the direction of the market. It may be implied from the Index’s positioning of eight of nine possible sectors active at the end of 2013 that there is a bullish outlook for US Equity.
By design, these sector exposures 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. 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. 

 “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 RPg Asset Management 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. One cannot invest directly in an 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.

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 

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