1) Strategically guided monthly asset allocation step:
A monthly Stock/Bond Model first generates the allocation to stocks, and then the balance of the portfolio is allocated between bonds and cash based on the reading of the Bond/Cash Model.
Stock returns are proxied by the MSCI World Total Return Index, bonds by the Barclay’s Global Long Term Treasury Total Return Index and cash returns are proxied by an equal-weighted average of the total returns of three-month Treasury securities from the U.S., Japan, U.K., Canada, and the Euro-Zone.
Benchmark used is 55-35-10
Model Transparency: The allocation indicators that we use for our Asset Allocation are the key point of our Fusion Analysis. They are a perfect sample of our 5 types of analysis: trend, valuation, sentiment, economic & interest rate indicators.
In a first step, when we allocate into Equity, the Valuation Indicators weigh 40% of the model. All the other four types of Indicators weigh 60%. If you need further information about our model, please visit www.betalphing.com
2) Tactical Asset Allocation Step:
Once we have designed the Monthly Asset Allocation, we run our sub-models:
The Sector and Geo Equity Models to allocate between Sectors and Countries
The Bond Geographical and Duration Model: Countries and curve strategy
The Currency Hedge Overlay Model
We mainly implement Betalphing through UCITS Compliant ETFs as well as Futures if needed. Benefits of Asset Allocation Using ETFs:
Diversification – instant exposure to a variety of asset classes
Transparency – exact understanding of the underlying securities
Low Expense Ratios – allow for a fully-allocated multi asset portfolio at a lower cost to a single asset class fund
Flexibility – high liquidity enables fast, easy moves among asset classes
Choosing an ETF over another is complex and challenging. Once a benchmark is selected, assessing the quality of ETF candidates is a specific task that requires disciplined steps.
Betalphing ETF Selection Criteria: