Sector Select Strategy

Strategy Dynamics

The Tone Capital Sector Select Strategy seeks to provide the stability, diversification, and long-term capital appreciation of large cap equity index investing as well as to avoid underperforming sectors and above average drawdowns. The portfolio employs a proprietary ETF-based tactical rotation methodology and rotates between equity and fixed income exposures based on a quantitative model which is analyzed for potential re-balance on one month intervals. As our model forecasts become bearish, the portfolio seeks a defensive posture and rotates to fixed income. As forecasts become bullish, the model will focus on a more aggressive posture and allocates to top ranked model-forecasted S&P sector ETFs.

Characteristics

The SECTOR SELECT STRATEGY is a sector rotation model that utilizes sector ETFs or fixed income ETFs of varying duration based on momentum and risk factors. The SECTOR SELECT STRATEGY seeks to outperform the S&P 500 (DRI) Index.

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

The S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 9.9 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 3.4 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization.

The Investment Process

According to industry research, asset allocation accounts for 88% of investment returns in a diversified portfolio (Source: Vanguard). Tone Capital’s Sector Select 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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