I recently announced major Theta website enhancements in an issue of Theta News. Never ones to be idle, our IT team has continued to work on even more enhancements, a few of which I am pleased to share with you today.

As you review these most recent enhancements, notice that they include improvements to both the Subscription and Manager websites, thus making it easier to not only find and compare active investment strategies on the database, but also to manage your own strategies if you are among our tracked models.

Here are our most recent improvements:

* On both the subscriber and manager sites, we have upgraded our benchmark for the Barclays Aggregate Bond Index to the Vanguard Total Bond Market Index Fund (VBMFX). This replaces the iShares Bond ETF (AGG) benchmark which can drift significantly. We’re also proud to announce that this change was the result of direct input from one of our tracked Investment Managers.

* Another manager requested modification was to use the S&P 500 Total Return Index rather than the price index on both the Subscription and Manager websites.

* And yet another subscriber-requested improvement is to offer a 50/50 Equity/Bond benchmark in addition to the existing 60/40 allocation.

* Switching over to the Manager side, we have enhanced the use of our unique Guest Pass feature by allowing Managers to enter a date range to review.

Just as a reminder, here are all of the other recently announced enhancements to the Theta Research Subscriber Site:

Complete Site Face Lift – Font sizes have been increased and color schemes standardized, making data and analytics easier to read;

Enhanced Report Formats – Page layouts are now simple, clean and efficient;

Faster Page Loading – Data retrieval and metric calculation speed have been dramatically increased, especially for models with long track records;

Standardized Performance Rankings – All rankings are now based on month-end values;

Daily Performance Still Available – For those strategies tracked on a daily basis, detailed statistics and analytics are still available on the individual program pages;

Easy to Navigate Model Statistics – Tabbed pages make it easier to find performance and risk statistics for all models;

Mobile Device Friendly – Now you can check in with your favorite Investment Managers and run ranking reports using your smart phone or other mobile device; and

Expanded Analytics – Added benchmarks and statistical analytics are available to aid in evaluation and comparison of model.

We here at Theta Research are excited about our new, streamlined websites. The bottom line is if you are not taking advantage of Theta’s subscription services, you’re really missing out. If nothing else, the recent market volatility should convince you of the need for strategies with the flexibility to move in and out of the markets.

To learn more, check out our Subscription Page describing both our Professional and Basic subscriptions options. The bottom line is that you can have access to some of the most well-known active managers in the industry all for a cost as little as $195. So, what are you waiting for? The next market correction could be a real bear!

As always, should you have any questions about Theta’s enhanced subscriptions or suggestions for future enhancements, feel free to contact me at (512) 628-5201, Option #1 or by e-mail at .(JavaScript must be enabled to view this email address).

Posted by MPosey on 03-12-2018 in Company NewsPermalink

NAAIM Issues Renewed Call for “Shark Tank” Competitors

The National Association of Active Investment Managers (NAAIM) has issued a renewed call for competitors for its “Shark Tank” competition. Since 2013, this unique challenge has allowed NAAIM Members to gain exposure to new ideas employing active management strategies, possibly leading to new business relationships.

Investment managers wishing to participate are requested to submit video presentations along with a written application to the committee for consideration to present in the finals at Uncommon Knowledge 2018, April 23-25 in Orlando, FL at the Wyndham Grand Resort Bonnet Creek. NAAIM Shark Tank preliminaries have been broadened to accept applications and videos from members as well as non- members.

For Investment Managers who employ active strategies, competing in NAAIM’s Shark Tank competition provides exposure to a room full of Advisors, many of which are seeking viable sub-advisory relationships. It’s an opportunity to describe your investment approach to the markets in your own words and answer questions posed by a panel of seasoned professionals.

The opportunity to present your active strategy to other Advisors representing literally billions of dollars of client assets doesn’t come around every day. The NAAIM Shark Tank could provide the exposure necessary to take your business to the next level.

To learn more about the Shark Tank Competition and how to apply to compete in this year’s contest, download the Shark Tank Rules and Application from the NAAIM website home page.

We hope to see you at the upcoming NAAIM Conference!

Theta Adds More New Strategies

Theta Research is pleased to announce the addition of three more actively managed strategies seeking third-party track record verification. All of these come from active management firms new to Theta and include the following:

Don Larsen, founder of Momentum Systems in Palm Springs, CA has submitted a new strategy for performance tracking. The strategy, also called Momentum Systems began trading on February 1, 2018. Theta will begin tracking upon receipt of February statements and the strategy will show up on the database once it has three months of actual trading history.

Vernon Bell, President of Texas Elite Advisory, LLC in Plano, Texas has initiated tracking of the Elite Relative Value Strategy. Theta has independently verified the actual performance of this model going back to its inception in May of 2008.

Randal Bailey, founder of Strategic Portfolio Management, Inc. of Canton, OH has submitted his Short Option Income strategy for tracking. Theta Research has independently verified the actual performance of this strategy back to its original inception date of October 1, 2015.

Stay Tuned – More New Strategies are on Their Way

One of the benefits of the Theta Research database of actual performance is that it is not a static list of the same old names and numbers. Instead, Theta has many new strategies in various stages of completion which will join the database of active Investment Managers in the near future. So, be on the lookout for our Theta News notices as they may contain just the Investment Manager you’re looking for.

Posted by MPosey on 02-07-2018 in Company NewsPermalink

Are your clients invested with enough “agility” to mitigate the risk of large drawdowns during severe market declines?

Agility Drills

Football season is winding down, with the college football national championship now decided and Superbowl LII only weeks away. Football fanatics out there (myself included) have been treated to a season with plenty of surprises, and we dread the coming months of football drought when there will be no games to watch on TV.

While most of us now participate in football by watching, many can also think back to our “playing days” in high school — when preparation for the upcoming season provided challenging conditions meant to simulate or surpass tough game situations.

I don’t know who decided that dressing up in full pads twice per day in the hot Texas sun was a good idea, but it seemed to be the thing to do in late August back in my hometown. “Two-a-days,” the tradition of having two daily football practices, one morning and one late afternoon, were a rite of passage in virtually every school district in Texas. I’m sure it was the same way in other states — it’s just hotter down here.

The “Friday Night Lights” movie and TV show attempted to shine a light on high school football in Texas, but to my way of thinking, that is how the rich kids played ball. Those of us in a small, “Class B” high school back in the 1970s had to make do with what we had, both in equipment and players. For example, our “trainer” was one guy with a roll of tape and a bottle of salt tablets, while our second string was mostly the first string in different positions. Hydration consisted of two water hoses — usually reserved for irrigating what little grass would grow on the field in those hot, dry conditions.

So, what does all of this football talk have to do with investing? In this article, I hope to highlight the importance of agility, both on the playing field and in an investment portfolio.

Perhaps the best place to start is to define what agility is. Wikipedia defines it as, “… the ability to change the direction of the body in an efficient and effective manner.” Obviously, physical agility is an important trait in football, where the object of the game is either to score a touchdown or to prevent one. When you don’t know which way your opponent is going to go, you must be prepared to react to whatever direction is taken to make the play. The same goes for investing.

The problem is that many investment portfolios today are passive, the very opposite of agile. If there has ever been a time when investment advisors should be concerned about the agility of their clients’ portfolios, it’s right now. We all know what happened to buy-and-hold investment strategies in the early 2000s and again in 2007–2009. Were your clients invested with enough agility to avoid those large losses — and those of prior bear market periods?

Worst Bear Markets/Corrections

Failure to include agile investment strategies can be costly. In football, the lack of agility can result in an opposing team’s score, or your own team’s fumble or tackle for a loss. For an investment portfolio, the lack of ability to adapt to market conditions can result in huge losses, as seen in Table 1. Continuing with the football analogy, I would like to suggest five ways you can improve the agility of your investment portfolio:

1. Diversify. Just as it wouldn’t make much sense to field a team with players that all have the same skill sets or who all play the same position, an agile investment portfolio should also be diversified to include noncorrelated strategies, each with different strengths in the portfolio. In the role of coach, the investment advisor must select the team of available strategies best designed to meet their clients’ investment goals.

Unfortunately, when discussing diversification, most of the financial press is talking about a passive, 60/40 stock/bond type of traditional allocation, often modified for the age of the investor. While including a small allocation to a passive strategy is probably a good idea from a diversification standpoint, it should not be the only strategy employed. Why? Because passive asset-allocation portfolios have done so poorly in past bear markets, requiring years to get back to breakeven. This can become an overwhelming sequence-of-returns issue for investors, especially retirees. To say the least, passive strategies have fumbled the ball at the worst possible times.

A true story will help to illustrate this point: Back in high school I had a coach who believed that all of the plays he developed were designed to produce a touchdown every time they were run — if they were executed properly. To prove the point, he decided (seriously!) that we would play an entire game using only two plays. You can imagine the result arising from this failure to diversify. No matter how well a play is designed, if the other team knows the ball will go either one place or another, you’re going to lose. We lost.

To achieve true diversification, advisors should develop portfolios for their clients that include tactical strategies with the agility to move to cash or other asset classes as market conditions dictate. Whether you call these strategies active, tactical, or alternative, they are characterized by rules-based strategies that seek to follow market trends rather than being victimized by them.

2. Know the playbook. This may sound very basic and unrelated to agility, but no amount of speed or quickness can help you if you’re in the wrong place at the wrong time. In an investment portfolio, it’s important for advisors to communicate why each investment strategy is included and what it is intended to accomplish. In football, sometimes an aggressive passing style is called for on offense; at other times, a tightly controlled and conservative game plan. At different times in the same football game, either style might be called for.

Similarly, it’s equally important to make sure that multiple investment strategies are represented in clients’ allocations and not just multiple asset classes. To be effective, the overall plan for a portfolio should be like a playbook, with different strategies designed to perform during a variety of market conditions across long time frames.

Unfortunately, I have seen advisors who want to remove one or more strategies because of underperformance over a short-term period. They think that all strategies should make money in all market environments, which is clearly not the case. It would be like removing a play from the playbook just because it didn’t work against one opponent.

3. Watch the films. The Saturday morning after the game was always dedicated to watching the game films. We used an old WW II–era Bell and Howell movie camera that often resulted in pictures so fuzzy that you’d swear it was filmed from the next county. What we could see clearly would be critiqued by our coach, usually in the form of running the projector backward and forward to document a missed tackle or blocking assignment.

Returning to the investment world, reviewing the films is akin to advisors monitoring their clients’ portfolios regularly. This is not to say that anyone — client or advisor — should be overly concerned with scrutinizing performance every day or every week. Instead, advisors should review their clients’ portfolios as frequently as quarterly and no less than annually. Such a review can help to determine whether the portfolio’s constituents are performing as expected and whether the risk level is appropriate.

4. Be ready for unplanned opportunities. In my high school football days, we had an incredibly fast quarterback. Occasionally, he would call a play but then realize that a lane had opened up that allowed him to run a quarterback sneak. I remember blocking according to my playbook assignment, only to see him standing in the end zone. His vision, coupled with his agility, resulted in a touchdown. (Of course, these little excursions didn’t always work, so our coach encouraged keeping them to a minimum.)

Advisors need to be aware that their clients are the target of direct advertising for a wide variety of investments, including precious metals, real estate, and even private equity opportunities. In addition, some advisors have clients who made their fortunes in real estate, oil, or other investments and want to continue to “dabble” in opportunities that might come along.

In such cases, advisors need to again take on the role of coach and help evaluate these opportunities on behalf of their clients. Going back to the playbook, the advisor might be able to show the client how the same or similar opportunities are already present in the portfolio holdings. Most importantly, however, is the need to realize that investment products marketed directly to investors are sometimes subject to higher risks than disclosed in the flashy marketing brochures promoting them.

5. Keep fantasy football in its place. A final point in this analogy is to be wary of the investment equivalent of fantasy football. For those who do not partake in fantasy football leagues around the world, it’s a way to establish imaginary teams of actual players and then score points based on their performance during games. The athlete’s performance is real and the games are real, but the scores are nothing but pure fantasy, hence the name.

A similar exercise in “fantasy” in the investment world is known as backtested performance. Backtesting occurs when an investment manager has a strategic idea, but it has not been traded with real money in an investment account. The solution is to set up a backtest, usually consisting of hypothetical trades applied to the past performance of a financial asset such as a stock, bond, index, mutual fund, or ETF.

Backtesting can be a valid and productive analytical tool when used properly, and a dangerous tool when used improperly. And, to be fair, there are many times when backtests are the only data available, such as in a brand-new strategy just starting out. Even so, investment advisors must resume their coaching role and make sure that not only is the trading strategy evaluated but also the methodology of producing the backtest.

Here’s Where We Can Help

One solution to the backtesting question is to seek out a database service such as Theta Research that specializes in tracking and verifying the actual performance of managed account strategies. The benefit of tracking even newer strategies is that it begins the process of building an actual track record that has been third-party verified.

The Theta online database allows you to analyze performance results across time frames and market environments. It’s your key to finding high quality sub-advisors and building alternative portfolios for your clients that provide investment options and a level of service unmatched by robo advisors and low-fee investment approaches.

As an independent data publishing firm, Theta provides a third-party set of eyes that not only calculates and verifies actual performance, but also maintains a subscription-based access to its database. This way, Theta’s database services can offer a sort of “scouting report” when looking for agile investment managers.

Cost effective. Comprehensive. Competitive advantage.

It’s Time to See What You’ve Been Missing

As we begin a New Year full of promise and opportunity, I want you to have the chance to experience a free trial of the actual Theta Research Professional Subscription. This free trial offers access to real-time performance data, complete with Investment Manager names and contact information.

Get the 7-Day Free Trial Today!

Mike Posey

Posted by MPosey on 01-18-2018 in Company NewsIndustry NewsPermalink

Theta Research is pleased to announce the addition of five new tactical strategies to our database of tracked models. Two of these strategies come from Investment Managers who are new to Theta while three have been developed by Managers who already have active tracking accounts on the Theta database.

Existing Managers John Worthington and Jon Dauble, co-owners of Evansville, IN based Dauble+Worthington Equity Portfolios, have submitted two new strategies for monthly tracking by Theta. The D+W Dynamic is a relatively new strategy and Theta Research has independently verified performance since its inception in May of 2017. The D+W Equity 102 strategy has a longer-term track record with verified actual performance dating back to its inception in May of 2013.

Another existing Manager submitting a new tactical model for monthly tracking is Armando Alizo, owner and portfolio manager at Mount Dora Capital Management in Cheyenne, WY. Armando has submitted the MDCM Stock Index Futures Portfolio for tracking. Theta Research has tracked and independently verified the actual performance of this strategy back to its inception of March 1, 2016.

New Investment Managers Added to the Theta Database

New Manager, Maia McGeeHee, is founder of Hermes Econometrics in San Rafael, CA. Maia has recently submitted her Hermes Domestic Equities strategy for monthly tracking by Theta Research. We have independently verified the strategy’s actual performance back to its inception date of January 1, 2011.

Likewise, Jean-Pierre Fruchet, President and portfolio manager of Barneau Holdings, Inc. of Montreal, Quebec, Canada is new to Theta Research. While Jean-Pierre is based in Canada, the programs tracked by Theta are traded in US dollar denominated mutual funds sponsored by Guggenheim/Rydex. As a result, the CIA-Rydex strategy will be tracked on a daily basis. Theta Research has independently verified the actual performance of this model back to its inception in October of 2011.

Happy Holidays!

All of us here at Theta Research would like to wish you Happy Holidays and a happy and prosperous New Year!


Posted by MPosey on 12-21-2017 in Company NewsPermalink
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