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Low Volatility Strategy

Strategy Dynamics

The Tone Capital Low Volatility Strategy seeks to provide diversification and long-term capital appreciation with less volatility and lower drawdowns than the overall US equities market. The strategy employs a proprietary ETF-based tactical rotation methodology and rotates between dividend and low volatility securities based on a quantitative model which is anlayzed for potential rebalance on one month intervals. The strategy may provide exposure to small, mid and large cap equities dependant on technical factors. While income is not a primary objective of the strategy, the ETFs utilized in the strategy's potential universe generate income.

Characteristics

The LOW VOLATILITY STRATEGY is a growth and income model that utilizes ETF securities investing in high dividend and low-volatility stocks which have historically declined less than the overall market during downturns, while participating during up markets. The strategy seeks to outperform the S&P 500 Low Volatility Index.

  • Tactical allocation strategy
  • Investment horizon: long-term
  • Rules-based investment process
  • Disciplined model-directed trading
  • Rebalance frequency: monthly

The S&P 500® Low Volatility Index measures performance of the 100 least volatile stocks in the S&P 500. The index benchmarks low volatility or low variance strategies for the U.S. stock market. Constituents are weighted relative to the inverse of their corresponding volatility, with the least volatile stocks receiving the highest weights.

The Investment Process

The Investment Process

According to industry research, asset allocation accounts for 88% of investment returns in a diversified portfolio (Source: Vanguard). Tone Capital’s Low Volatility Strategy adjusts investment allocations per proprietary factors based on durable investment themes, providing a dynamic solution designed to avoid the pitfalls of buy and hold investing. A monthly rebalance frequency is employed, seeking to capture the nuance of macro shifts.

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