A Strategic Way to Invest for the Long Term

ACM establishes positions in the most liquid asset classes with specific targets for each. Also, these assets are negatively correlated for greater diversification benefits. A proprietary active systematic rebalancing methodology is deployed seeking to monetize short-term volatility from deviations of the respective targets for each asset class. A key objective is to participate more in upside equity performance with less on the downside.

Listed below are responses to some common questions and issues. Please reach out to us directly with other issues you may have.

ACM launched an index in May of 2017, under the Bloomberg ticker of EALTS, with S&P Dow Jones serving as the calculation agent. The inception of the pro-forma results is from 1/1/07. The equity components include allocations to the S&P 500, Russell 1000, S&P Mid-Cap, and the Russell 2000 with a target of 70%. The hedges include 15% each for VIX linked investments that mirror the construct of the S&P 500 Dynamic VIX Futures Index and for bonds through 20+ Year Treasury Bonds (TLT), and Short-term Treasuries. These assets are actively rebalanced according to proprietary and predetermined rules. There are no market forecasts or directional calls.

The S&P 500 Dynamic VIX Futures Index dynamically allocates between the S&P 500 Short-Term VIX Futures (months 1-3) and S&P 500 Mid-Term VIX Futures (months 4-7) as according to the shape of the implied volatility curve. It seeks to provide a cost-efficient hedge for equity exposure.

  • Actively rebalancing the Volatility allocation by adding when is declines and taking gains when it rises.
  • Maintain an ongoing allocation to Volatility as a hedge to equity exposure, which is always net long.
  • The shape of the implied volatility curve dictates ongoing exposures.

It is obtained through ETFs and/or Futures. Exposures are actively rebalanced as according to proprietary rules.

It is used as a hedge for equities. It also provides a haven for investors during more extreme periods of volatility. Treasuries also have proven to be negatively correlated with equities. Our exposure is rebalanced as according to our rules-based disciplines.

For our ACM Risk Managed US Equity Strategy, the allocations are 70% equities, 15% treasuries, and 15% volatility. These allocations are guided by predetermined rules for each asset. The equity exposure is comprised of allocations to the S&P 500, Russell 1000, S&P Mid Cap, and Russell 2000 for an overall target allocation of 70%. Our bond exposure of 15% includes allocations to treasuries either through the TLT 20 YR+ Treasuries and Short-term Treasuries. Treasuries are used as a hedge for equity exposure and as a potential haven during difficult equity markets. Our rules are designed to harvest short-term volatility and maintain consistent exposure to the target allocations.

We believe our strategy is an appropriate fit for an alternative’s allocation and more specifically for liquid alternatives. Our strategy generates asymmetric risk/returns over the long-term attempting to participate more in upside equity performance while limiting the downside. Other applications for fit purposes could include a hedged equity strategy, a multi-asset strategy, and having flexibility for customization. It may be suitable for any market environment and especially during periods of increased and more frequent volatility.

To Participate but Protect or strive to achieve asymmetric risk/returns or more participation in upside equity performance while limiting the downside over the long-term. Proprietary rebalancing rules assure that asset weightings are increasing in a declining market and decreasing when it rises. The strategy invests in the most liquid assets that are negatively correlated for greater diversification benefits. Also, it is quite efficient for trading purposes and is generally not capacity constrained.

Attempts to monetize short-term volatility in a predetermined and disciplined manner using multi-assets that are uncorrelated and applying an active systematic rebalancing (ASR) methodology for this purpose. It invests in very liquid assets for stocks, bonds, and volatility that have a proven history of negative correlation affording greater diversification benefits. There are no directional market calls or forecasts as the rebalancing methodology attempts to monetize short-term volatility when it occurs. It strives to deliver asymmetric risk/returns over the long-term and is suitable for different market environments.