Strategy Description: The CMG Beta Rotation Strategy seeks to enhance the roles of equities in a client portfolio by employing a disciplined process to measure market price trends. The investment objective is to outperform broad equity markets while simultaneously reducing risk. The process invests in the U.S. equity market when the market is demonstrating strong price trend. Otherwise, the process invests in the utility sector when utility stocks are demonstrating strong price trend. The Utilities sector is defensive and has exhibited a low correlation to broad equity markets. During rare periods of broad-based negative price trends, the process may invest 100% in cash. The strategy invests in the ETF demonstrating the strongest relative performance. Positions are measured and evaluated daily. The benchmark for the index is the CRSP U.S. Total Market Index, which is the index underlying the Vanguard Total Market ETF. The CMG Beta Rotation Strategy evaluates the price trend of a broad based equity market ETF and a sector ETF:
- Vanguard Total Market ETF (VTI): A low fee U.S. Equity market index ETF comprised of large-cap, mid-cap, and small-cap stocks diversified factors growth and value styles.
- Vanguard Utility Sector ETF (VPU): A low fee utility sector ETF that seeks to track the performance of a benchmark index that measures the investment return of stocks in the utilities sector.
- Helps manage equity exposure and volatility
- Lowers equity portfolio beta during market declines
- Exposure to a risk diversifying equity factor
Investment Objective: Capital appreciation with the ability to reduce equity market downside capture.
Suggested Portfolio Positioning: Serves as a satellite allocation and a complement to a client’s equity portfolio.
Suggested Allocation: Typically representing 10% of a client’s traditional equity allocation or 6% of a client’s total portfolio.
Benchmark: CRSP U.S. Total Market Index
Morningstar Peer Group: Utilities / Sector / US Large Cap