Tactically Conservative ... Bullish on Life!
The Best-of-Breed Core Momentum Index selects a portfolio of 3 ETFs monthly, one from each of its underlying Sectors, Factors, and Global strategy categories. Each selected ETF must have a minimum of $10B AUM to qualify as Best-of-Breed.
- During Bull Markets, it holds a aggressive allocation: 100% equities, 0% bonds.
- During A Market Crash, the Index automatically shifts to 100% defensive positions.
- Bull/Bear Indicator, StormGuard-Armor, determines the market's bull vs. bear status.
- Advanced signal processing, that we call Temporal Portfolio Theory, employs the cross-disciplinary sciences of Matched Filter Theory and Differential Signal Processing – the same technologies that enable WiFi, USB, iPhones, digital TV, and remotely controlled rovers on Mars to perform so well. None of these were possible 68 years ago when Modern Portfolio Theory first taught us to "buy-and-hold" and "diversify-and-rebalance." The Index additionally employs a trifecta of Artificial Intelligence methods to improve the quality of its decisions. They include:
- Adaptive Tuning that seeks to eliminate hindsight bias in the momentum algorithm;
- Fuzzy Logic that seeks to better assess the market’s Bull vs. Bear status; and
- Genetic Algorithms that evolve the strategies to eliminate hindsight selection bias.
Risk is not a one-dimensional problem cured by a single dose of diversification. Risk is a multidimensional problem, and diversification’s passive “risk dilution” is only just the start. Our research shows that the most proficient way to reduce risk is through “risk avoidance” – specifically, avoidance of laggards and bear markets. Both require reliable measures of momentum. That’s our strong suit. It’s all about advanced signal processing that reduces noise and produces cleaner momentum signals.
While most Indexes focus on a specific slice of the market, such as a particular sector, factor, theme, or asset class, MAI Indexes are complete, self-contained tactical portfolio management systems that evaluate over 100 ETFs each month and select a portfolio that seeks to provide the five things investors want most.
Details about the three underlying strategies plus more information about the technology.
Monthly selection history for the underlying strategies of the Index's investment model.
The MAI Best-of-Breed Core Momentum Index first identifies whether it appears bull or bear market conditions prevail, and then during bull markets employ three underlying momentum strategies of categories Sectors, Factors, and Global to each select one equity ETF, and during bear markets employ integrated bear market strategies to select three defensive leader ETFs. The investment process consists of these steps:
⦁ Identify the Bull Market Universe: The bull market investable universe generally consists of mid to large capitalization ETFs traded on a U.S. exchange in these categories: bonds, sectors, dividends, regions, and countries. Inverse and leveraged ETFs are excluded. All must have at least $10B AUM to be a candidate.
⦁ Identify the Bear Market Universe: The bear market investable universe generally consists of mid to large capitalization ETFs traded on a U.S. exchange in these categories: aggregate bonds, corporate bonds, hi-yield bonds, U.S. treasuries, gold, and broad-based U.S. equity. All must have at least $10B AUM to be a candidate.
⦁ Assess the Bull/Bear Indicator: The Bull/Bear Indicator seeks to determine whether U.S. equity markets are advancing (“Bull”) or have an elevated risk of decline (“Bear”) by assessing three metrics of U.S. equity markets: price-trend, market momentum, and value sentiment.
⦁ Bull Market ETF Selection: During Bull markets, the Index further develops 12 evaluation Models for each Category, each of them with a different mix of candidate ETFs from its related subcategory. At month-end each Model selects a momentum leader, and each Category selects its overall growth and income momentum leader from the selections made by its 12 underlying Models. The Index further employs a proprietary AI Genetic Algorithm that continuously evolves the set of candidate ETFs associated with each of the 12 Models seeking to adapt to ever changing market conditions and improve investment performance.
⦁ Bear Market ETF Selection: During a Bear market the Index creates two defensive models with different sets of candidate funds. Three defensive ETFs are selected.
⦁ Duplicate Selection Reduction: An algorithm attempts to identify duplicate selections and substitute alternatives from the same subcategory. A bull market Index will be comprised of three unique ETFs and a bear market Index will be comprised of three unique ETFs.
Note: The Best-of-Breed Core Momentum Index calculated by Solactive AG includes the fund's management fee, which is not included in the index calculation of this document. The Index's inception date was 11/01/2020. Hypothetical performance prior to inception is generated using the walk-forward testing methodology with out-of-sample data. Trade execution modeled is at market close of T+2 days following the rebalance evaluation.
AlphaDroid is a subscription-based signal provider designed with the specific needs of financial advisors in mind.
SectorSurfer is a subscription-based signal provider designed with the specific needs of individual investors in mind.
Merlyn.AI Corp. is exclusively licensed to create and sponsor ETFs based on indexes made by SumGrowth Strategies.
Merlyn.AI, SectorSurfer, AlphaDroid, True Sector Rotation, SwanGuard, StormGuard, StormGuard-Armor, Own-the-Bubble, Polymorphic Momentum, MAI Indexes, Temporal Portfolio Theory, Bull-Rider Bear-Fighter, and SumGrowth Strategies, are all trademarks of SumGrowth Strategies, LLC. Seattle WA 98125. MAI Indexes, SectorSurfer, and AlphaDroid are services of SumGrowth Strategies, which is not a registered investment advisor and doesn't provide professional financial investment advice specific to anyone in particular. SectorSurfer, AlphaDroid and Merlyn.AI provide algorithmic strategy analysis tools that produces trade signals according to the set of funds provided for analysis. Strategy performance is hypothetical, based on trading at the market close of trade dates, and does not include associated trading fees or account fees.
MAI Indexes: A SumGrowth Strategies, LLC service.
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“SNUG Index” refers to: Merlyn.AI® SNUG Tactical Growth & Income Index “DUDE Index” refers to: Merlyn.AI® DUDE SectorSurfer Momentum Index
“WIZ Index” refers to: Merlyn.AI® WIZ Bull-Rider Bear-Fighter Index
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