Strategy Overview

The approach uses a systematic rules-based institutional caliber methodology that seeks to capture long term equity performance while minimizing market volatility.

This model uses a multi-factor fundamental scoring system to select the top ranked sectors and companies. The equity portion of the model applies a dynamic sector strength indicator based on fundamental momentum of companies in each sector to seek out the 5 top ranked sectors.

The model also uses a separate multi factor investment model for each sector, to attempt to select leaders in each sector. The market indicator determines the equity exposure to the market by dynamically adjusting allocation each period to the iShares 7-10 Year Treasury Bond ETF (IEF) or the iShares TIPS BOND ETF (TIP) between 0% and 100% of the portfolio.

The Alpha Vee fundamental momentum approach combined with multi-factor models for each sector intends to add value over an extended time horizon by choosing the best companies in the best sectors. Applying a dynamic allocation of Treasuries makes the model more robust by seeking to reduce volatility.

Strategy Philosophy

This risk managed model invests in US equities with market capitalization between $300M and $5B. The model has both an equity and a Treasury bond component.

Equities: The model holds approximately 50 positions. The model holds the top scored equities of the top ranked 5 sectors. The top 5 sectors are determined based on dynamic fundamental momentum indicators and weighted according to their respective benchmark weights. Constituents from each of the selected sectors are ranked based on a sector multi-factor model.

Treasury Bond: The model adjusts the allocation each quarter to the iShares 7-10 Year Treasury Bond ETF or the iShares TIPS BOND ETF (TIP) between 0% and 100%. The variable allocation is determined according to a proprietary fundamental momentum based indicator that scores the quality and value of the overall market.

Portfolio Construction from an Investment Thesis Point of View

The model is constructed by using a top down approach:

Market exposure → Inflation RM → Sector exposure → Stock selection.

Together, these four components strive to deliver better returns while mitigating risk in each level:

Market Exposure: Dynamically manage allocation of iShares 7-10 Year Treasury Bond ETF IEF or iShares TIPS BOND ETF (TIP) in bear markets.

Inflation Risk Management determines which BOND ETF to select. IEF is selected when the inflation rate is low and TIP is selected when the inflation rate is elevated.

Sector Exposure: Seek top graded sectors

Stock Selection: Select the highest fundamentally ranked stocks in each sector by applying sector multi-factor models.

Licenses to use the Index as the underlying value for derivative instruments are issued to stock exchanges, banks, financial services providers and investment houses by Alpha Vee Solutions Ltd.. Please contact info@alphavee.com.

Resources

• Alpha Vee Risk Managed SMID Top 5 Sector Equities Index methodology
• Alpha Vee Risk Managed SMID Top 5 Sector Equities Verification Report