Tactical Short-Only Strategy Comes Out Of Hibernation: 
Downturn In Market Continues To Signal Opportunity


Tactical Short-Only Comes Out Of Hibernation (Update)

Our tactical short-only strategy known as Global Advantage All Asset (which is also half of our Global Long/Short Strategy), seeks to use inverse funds to short 11 different asset classes.  When not shorting, it waits in cash.  For nine long weeks this past summer, which was one of the longest idle periods ever, it was "hibernating" waiting for future opportunities to short.  That time came on July 29th, when the strategy kicked into high gear and started using inverse funds again as designed.  As we mentioned back in August, something has changed in the markets.


Equity line of Global Advantage All Asset shows flat line ("in cash") from late May to late July, then activity again.

3-Minute Video On How Global Advantage All Asset Strategy Works

Global Advantage All Asset: Tactical inverse strategy (short-only)
Global Advantage All Asset: Tactical inverse strategy (short-only)

Shorting - The Ultimate Diversifier


During an interview in 2009, famed M.I.T. Professor Andrew Lo had this to say about diversification and the role of shorting:

"The idea is to create different kinds of diversification, to diversify not just across stocks, but across different kinds of asset classes--stocks, bonds, currencies, commodities, real estate--and then on top of that be able to short. The whole notion of shorting up until recently seemed like voodoo. It was viewed as dangerous and mystical. It's really not, but it does take some time and effort to educate the public on what it is. If you were short even a little bit last year, it made a big difference to your portfolio." - Source: U.S. News & World Report March 2, 2009

In a more recent interview in 2012, here is what Dr. Lo had to say about buy & hold:

"Buy-and-hold doesn't work anymore. The volatility is too significant.  Almost any asset can suddenly become more risky.  Buying into a mutual fund and holding it for 10 years is no longer going to deliver the same kind of expected return that we saw over the course of the last seven decades, simply because of the nature of financial markets and how complex it's gotten." - Source: Money Magazine, March 2012 

 
Fortunately, There Are Options (and no need for margin accounts)

There are ways to incorporate shorting capabilities into your client accounts.  We have a couple of options that can tactically use inverse funds when opportunities present themselves: 
  • Global Advantage All Asset - Tactical short-only strategy that uses 11 different inverse funds
  • Global Long/Short - Combination of our Global Rotation-Squared & Global Advantage All Asset Strategies
Every short strategy we've ever seen does well in stock market drops, but then collapses with huge losses during the subsequent equity bull markets.  During those "give back the gains and then some" time periods, all they end up doing is being a cause of continuous hemorrhaging (see charts below).

Remember, our tactical short-only strategy doesn't need a bear market to succeed.  It can make money in equity bull or bear markets, because there's always a market falling somewhere.  Think of it as an Absolute Return Short Strategy:  Seeks to be flat-to-moderately-up in equity bull markets and up strongly during corrections to full-blown bear market plunges. 

This chart shows backtested and live results.  Live since 4/1/2012.

Here are the live numbers since inception.  What looks like it would work best as a long-term hedge?


(As of 9/30/2014)

Please contact us for more information regarding these or any of our other Tactical or Alternative Strategies.  We'll be happy to run analysis on your existing allocations to see how you could best use our strategies.

To download fact sheets for any of our strategies, please click on this link.

Please contact us for more information.
  

(877) 885-7468

www.optimusadvisory.com 

[email protected] 

 

 

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Optimus Advisory Group's Mission

Optimus Advisory Group seeks to create liquid alternative and tactical investment strategies that meet the needs of our advisor clients.  We use a disciplined, quantitative methodology to build and manage our portfolios.  Over a full market cycle, these strategies are designed to provide superior risk-adjusted returns while maintaining a low-correlation to traditional market indices. 

 

SMA / UMA / TAMP

 

Our strategies are available on the following platforms:

  • TD Ameritrade, Schwab, Fidelity & Pershing via Placemark's UMA platform 
  • TD Ameritrade Separate Account Exchange
  • Trust Company of America
  • FTJ FundChoice
  • Sawtooth Asset Management
  • FOLIOfn

Strategy License Agreement

Advisors wanting to directly manage their own client accounts can access our liquid alternative and tactical strategies through a Strategy License Agreement.  For a monthly asset-based fee, we will provide the trade instructions generated by our proprietary mathematical algorithms.

 

Benefits of a Strategy License Agreement

  • Custodian Neutral - Your client accounts can stay where they are.  There is no need to transfer assets to a new platform or custodian.
  • Cost Effective - A Strategy License Agreement is the most cost effective way to access our alternative and tactical strategies.
  • Month to Month - There is no long-term commitment.
  • Control - You maintain complete control over your client accounts.   

For more information about any of our programs, please contact us.  You may also download the fact sheets for any of our investment strategies on our website.  Each fact sheet contains strategy descriptions, performance results, backtesting research, disclaimers and disclosures for each model.

 

Thank you for your interest in our investment strategies.  We'll continue to keep you informed.

 

Sincerely,

 


Steve Rumsey

Chief Investment Officer 

Optimus Advisory Group
6 Venture, Suite 200

Irvine, CA  92618 

[email protected]

www.optimusadvisory.com 

(949) 727-4734

 

Advisory services offered through Optimus Advisory Group,

a registered investment advisor.

 
Disclosures

The performance results shown include the reinvestment of dividends and other earnings. Comparison of the Optimus Advisory Group Programs to any other indices is for illustrative purposes only and the volatility of the indices used for comparison may be materially different from the volatility of the Optimus Advisory Group Programs due to varying degrees of diversification and/or other factors. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. Optimus Advisory Group does not make any representation that the Optimus Advisory Group Programs will or are likely to achieve returns similar to those shown in the performance results in this presentation. Optimus Advisory Group reserves the right to trade different funds within their models.
 

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal to any corresponding historical index. The S&P 500 Composite Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The historical performance results of the S&P (and those of all indices) do not reflect the deduction of transaction and custodial charges, nor the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices and index funds used as proxies for indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual client or prospective client in determining whether the performance of the Optimus' portfolio meets, or continues to meet, his/her investment objective(s). It should not be assumed that any Optimus portfolio holdings will correspond directly to any such comparative index.
 

Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investment strategies devised or undertaken by Optimus Advisory Group) will be profitable for a client's or prospective client's portfolio. All performance results have been compiled solely by Optimus Advisory Group and have not been independently verified.
 

The Optimus performance results do not reflect the impact of taxes.