We're excited about the introduction of two new flagship value and growth investment strategies, AlphaClone Select and Momentum Select. We believe the strategies represent the best the market has to offer in terms of securities-based hedge fund replication. Both strategies are available to investors through our investment account service only. Financial advisors or institutional investors who want to inquire about how to gain access can contact us directly.
AlphaClone Select (download backtest .pdf)
AlphaClone Select utilizes a new Clone Score metric we've developed. Simply put our Clone Score ranks a manager's performance AND consistency when cloned over time. We define performance as outperforming over a certain hurdle rate (i.e. it's not enough to outperform by a little bit) and our definition of consistency accounts for how long a manager has achieved that performance (i.e it's easier to outperform 15 months out of 20 than 75 months out of 100). Both measures are then combined to provide a score for each manager in our universe – the best scoring managers are then combined to form our AlphaClone Select fund group from which we then select 25 to 30 holdings (both the managers and the stock selection methods are proprietary). We will repeat the above analysis at regular intervals and adjust our manager list accordingly.
Momentum Select (download backtest .pdf)
As the name suggests, Momentum Select scores managers using performance for their recent past. Scoring is performed quarterly so the managers that make up the group can change each quarter making this a "dyanamic" group strategy. The strategy is more growith oriented than AlphaClone Select and holds a concentrated portoflio fo about 25 to 30 stocks). Just as for AlphaClone Select, the exact manager and stock selection method the strategy utilizes is proprietary.
Momentum Select does a good of addressing the question as to whether there is persistence in returns using a securities-based replication approach. The strategy's backtest is backward looking only in that each quarter from inception (May 2000), it selects managers based only on their performance looking back from each rebalance date. Persistence in returns is perhaps the most analyzed and studied aspect of hedge fund returns and Momentum Select doesn't disappoint (see table below).
Dynamic Hedging
Both strategies employ a new dyanamic hedging feature that serves to manage downside volatility and reduce drawdowns. Our dynamic hedge is based on the 200 day simple moving average for the S&P500. The strategies will oscillate between 100% long and market neutral depending on where the index closes at each month end relative to its average.
