QID’s focus is on developing strategies that address investor behavior and needs.
The industry promotes and develops strategies to address diversification and capturing alpha, performance and risk aversion. Whereas, based on behavioral studies, investors appear to be loss adverse. Investors appear to want reasonable upside in a bull market but with downside protection in bear markets. An analysis of money market flows as a percent of mutual fund assets would indicate that the percentage of money market assets increases dramatically as market losses accelerate, 20% plus. The money market levels recede as the markets rebound, well after the recovery. The result as noted in the annual Dalbar studies is that investors capture less than half of the market index performances over time. Therefore, investor’s behavior indicates that they are loss not risk adverse.
Loss aversion, downside protection, is not only an investor behavior but also a sound investment practice. Our CIO was the former Director of Merrill Lynch Manager Due Diligence team. He focused on directing numerous studies evaluating the ability of manager performance measures to predict future success, persistence. The analysis concluded that the top 40th percentile of managers over three or five years had less than a 20% potential to repeat their performance over the ensuing period of time. Needless to say, performance ratios that depended on past performance were also of little value. Bottom line, using past performance is analogous to trying to drive your car using only the rear view mirror, you may be successful short-term but sooner or later you are likely to crash. The one measure that had the highest level of persistence was downside risk.
QID Provides Investors the Strategies For the Diversification They Need…
QID’s Tactical Rotation Strategies currently provide investor’s exposure to global, U.S. and international equity as well as fixed-income and alternative asset classes for the diversification investors need. The majority of our strategies are implemented with ETF’s that provide a secondary level of diversification to avoid the specific risk of any one security and tend to be cost efficient.
…With the Downside Protection They Desire…
The industry preaches to stay fully invested with diversification as a means of loss mitigation, Modern Portfolio Theory. The issue is that there are few strategies that focus on capital preservation to protect investors from extreme downside risk. As expected, during major economic events such as the bursting of the technology bubble in 2001-2003 and the mortgage meltdown of 2008-2009 the majority of asset classes participated in the stock market carnage. The only asset class that maintained a negative or low correlation to the stock market in 2008-2009 was U.S. Treasuries.
QID’s strategies address this issue with a built-in downside protection mechanism that investor’s desire, Post Modern Portfolio Theory. The strategies proprietary algorithms implement defensive treasury/cash positions up to 100% during periods it identifies as having a high probability of market loss, a feature absent from buy and hold portfolios.
…Managed by an Experienced Portfolio Team and is GIPS Compliant.
QID’s CIO has over 35 years of investment experience as a fixed-income and equity analyst as well as 15 years as Director of Manager Due Diligence. He is known for his quantitative innovations in the manager due diligence field being one of the first to develop downside risk measures, returns based attribution analysis and one of the first to use holdings based attribution and factor analysis.
Quantitative Investment Decisions (QID), claims compliance with the Global Investment Performance Standards (GIPS) and independently verified by ACA Compliance Group.
Currently, our strategies are available as signals or a Separately Managed Account through the Schwab Marketplace.