The Atlas Global Balanced Strategy (the Strategy) aims to outperform strategies that are balanced approximately 60% in global equities and 40% in fixed income. The 60/40 allocation is prevalent among institutional and individual investors.
Sixty percent of the allocation of the Strategy will be the Atlas Global Defensive Equity Strategy. The remaining forty percent of the strategy will be yield-oriented asset classes that have lower investment risk than equities.
Atlas Capital Advisors LLC (the Manager) utilized the approach for the 60% of the fund in global equities is described in Defensive Equity Strategy. This part of the portfolio aims to outperform the capitalization-weighted global equity index. For the remaining 40%, the Manager uses a proprietary framework to evaluate expected returns relative to risk for a large set of yield-oriented investment categories. These categories include investment-grade fixed income, high yield of various maturities and credit quality, local and hard currency emerging market debt, preferred stock, bank loans, and inflation-protected securities. The aim of this part of the portfolio is to outperform the Bloomberg Barclays U.S. Aggregate Bond Index.
The Strategy uses a consistent, systematic approach with a foundation in academic and Manager proprietary research. The overall strategy benchmark is 60% FTSE Global All Cap-Net Tax (U.S. Regulated Investment Company) Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index.
The following sections describe the research and approach underlying the 40% of the fund in yield-oriented investments.
Research
The Manager utilizes academic, investment industry, and proprietary research regarding allocation strategies among fixed-income choices. The primary attributes considered are expected return, sentiment, and risk.
Approach
(1) Evaluate expected return:
- The Manager estimates the future investment return for yield-oriented investments by adjusting the current yield for downgrades, defaults, carry, capital appreciation, and other factors.
(2) Evaluate sentiment
- Current investor sentiment is assessed based upon the recent price history, whether the price trend is positive or negative.
(3) Evaluate risk:
- The uncertainty of the expected return is calculated based on historical uncertainty.
(4) Identify the most favorable choices
- Potential choices are ranked on two criteria – the return/risk ratio and sentiment
- Investments made for the Strategy must rank highly on both dimensions
(5) Portfolio optimization
- Three to five choices are selected for the yield-oriented part of the portfolio, with the weights set to optimize the expected return/risk ratio of the overall Strategy.
Rebalancing
Portfolios are rebalanced quarterly, using the process described above.
