The advantage of being able to reconstruct and verify historical track records has not been lost on a new crop of Investment Managers. Following are three new managers to Theta as well as an existing Manager with a new strategy: J. Stuart Kruse, CFA, MBA, CEO and Founder of Kruse Asset Management is a new Theta Manager based in Chicago, IL. Stuart’s strategy is known as the KAM Quantitative Value Portfolio, or QVP for short. Theta Research has independently verified the KAM QVP track record back to its inception in May of 2007. Another new Investment Manager is James P. O’Mealia, founder of Sunnymeath Asset Management, Inc. of Red Bank, NJ. Sunnymeath has enlisted Theta to track its All-Cap Value Equity model. Theta has documented and verified Sunnymeath’s strategy back to its inception in April of 2012. Douglas S. MacKay, CFA and William F. (Bill) Hoover are principals of Broadleaf Partners, LLC in Hudson, OH. Broadleaf has submitted its Growth Equity Portfolio for tracking by Theta Research. Theta has reconstructed and verified the Growth Equity Portfolio track record back to its inception of March 1, 2010. Current Theta Investment Manager, Brian Boughner, co-founder of Parallel Financial Partners has added another strategy to be tracked by Theta. The Value Plus Strategy is a new model and Theta has established tracking as of its inception date of September of 2016. NAAIM Announces its 2016 Outlook Conference - The Impact of Technology on Marketing and Trading The National Association of Active Investment Managers (NAAIM) will hold its 2016 Outlook Conference on November 14 – 15 at the Dallas/Fort Worth Airport Marriott. November will be here faster than we know it. And with it will come a new president-elect, new congressional leaders and a host of other factors that could affect markets in 2017. Now is the time to consider those factors and what technology you may need to use just to keep up. Welcome to Outlook 2016, your place to come together with other leaders in the Investment Advisor community to tackle these tough questions - together. Information and Registration information for the NAAIM Outlook Conference.

The stock market’s volatility in 2016 has underscored the need for actively managed investment strategies in a diversified portfolio. In this issue of Theta News, we will introduce both an active strategy with more than ten years of actual track record as well as a new strategy that has been recently developed by an existing Theta Research Investment Manager. Speaking of long-term strategies, are you having a hard time finding managed account strategies with actual track records going back more than ten years? If so, you’ll be happy to know that there are more than two-dozen actively managed investment strategies on the Theta database with actual track records going back more than 10 years. And the list is growing all the time. While the buy-and-hold crowd claims that it’s impossible to beat the market over time, many of these strategies have done just that by employing active management strategies through the years. Another benefit of Theta Research is that we can often reconstruct long-term historical track records. Some Managers with long-term track records have not had the advantage of being tracked and verified since their inception. In many cases, Theta Research can reconstruct an actual track record using third-party brokerage or custodial statements. MDP Associates, highlighted below, is an excellent example of this advantage. MDP joined Theta in August of this year but had an actual track record going back to October of 2002. If you are an Investment Manager with a long-term track record that has not been independently verified, give us a call at (512) 628-5201, Option #1 to see if we can document your hard work. On the other hand, if you are an Investment Manager seeking out long-term performers, the Theta Research database may be just what you’re looking for. Just go to the Theta website at www.thetaresearch.com and follow the instructions for subscribing to the Theta database. I think you’ll be glad you did. Another New Strategy From an Existing Theta Investment Manager: Existing Theta Investment Managers Marty Kerns and Parker Binion of Kerns Capital Management in Houston, Texas have initiated tracking of their newest strategy, the KCM Valarian Strategies – Equity Exposure. This model is the latest in the KCM Valarian series of managed accounts and has been tracked by Theta Research back to its original inception date of May 1, 2016. A New Investment Manager Joins the Theta Database: New Investment Manager, Mark Pankin, Ph.D, founder of MDP Associates in Arlington, Virginia, has initiated tracking of his NDX Trading strategy. As mentioned above, Theta Research has independently documented and verified the actual performance of this model back to its original inception date of October 1, 2002.

Doubting DALBAR Every year, Dalbar, Inc updates its Qualified Analysis of Investor Behavior (QAIB) Study. Just like clockwork, this study shows that, in general, the average equity and bond investor receives a return far lower than that of their benchmark indexes. The apparent reason, at least according to Dalbar, is that investors tend to switch from fund to fund chasing returns, too often buying high and selling low. As you might suspect, the buy-and-hold crowd loves this Study, saying that it proves the value of passive investing. In Dalbar’s world, simply investing in a low-cost index fund buying and holding it no matter what is the “smart” thing to do. Dalbar has produced and updated this study since 1994 without much pushback, at least not until now. In a recent article entitled, The Fallacy behind Investor versus Fund Returns (and why DALBAR is dead wrong), mathematician and economist, Michael Edesses takes on the Dalbar QAIB Study and challenges its buy-and-hold conventional wisdom. According to Edesses, “…there is no way to determine if investors underperform the mutual funds they own, either because of bad timing or for any other reason.” For many years, the QAIB Study has been used to call market timing and other active investment strategies into question. “Better to sit and take whatever the market throws at you rather than time the market,” they say. Edesess’ analysis, on the other hand, says that there will always be a substantial difference between investor and index returns, but that it’s impossible to tell how much, if any, of this difference is attributable to poor market timing by investors. This article is a must-read for anyone who actively manages portfolios on their own or on behalf of clients. While you may not agree with all of Edesess’ claims, the article is important because it calls into question a bit of conventional wisdom that has been accepted as gospel since 1994. Of course, the buy-and-hold crowd will not let the QAIB Study go gently into that good night, but we now know that the math doesn’t necessarily support their favored conclusion. Announcing More Strategies Being Now Being Tracked by Theta Existing Investment Managers Marty Kerns and Parker Binion of Kerns Capital Management have added the KCM Valarian Four Seasons strategy. Theta Research has verified the track record of the Four Seasons Strategy back to its original inception date of April 1, 2016. Another existing Investment Manager, Dr. Gary Harloff of Harloff Capital Management, has added two more strategies under his University Beta Strategies™ series. The new strategies are US Dollar and Fully Diversified, bringing the total number of Dr. Harloff’s tracked strategies to ten. Theta Research began tracking these strategies as of their original inception dates in June and July of this year. New Investment Manager, David T. Bush, Managing Member and CIO of ALPHATATIVE, LLC. Located in Beavercreek, Ohio has initiated tracking of his award-winning Stratversify^® Strategy. This model recently won the National Association of Investment Managers (NAAIM) “Shark Tank” Competition as well as BattleFin’s “Sharpe Ratio Shootout.” Theta Research has verified this strategy’s actual performance back to its original inception date of March 20, 2011.  

In This Edition of Theta News: * Theta Research is featured at Puget Sound MTA Chapter meeting. * Theta Research Announces Recent New Manager and Model * Refer an Active Manager to Theta Research Theta is Featured at the Puget Sound Chapter of the Market Technicians Association (MTA): On June 16^th, Mike Posey, Theta Research’s Marketing Director was the featured speaker at the Puget Sound MTA Chapter meeting. In this presentation, Mike shared his insight on the due diligence process drawn from his more than 16 years of finding, evaluating and marketing managed accounts. Using prior MTA presentations as a springboard, Mike focused on why it is important for Investment Managers to have a track record consisting of actual, verified returns. He also discussed the inherent limitations of backtesting from a due diligence standpoint and why it’s especially important for early-stage Investment Managers to document their performance in real-time trading. Announcing the Addition of New Manager and Models: Dr. Gary Harloff, current Theta Investment Manager and founder of Harloff Capital Management, has expanded his University Beta Strategies by adding the Emerging Markets - Equity model. This brings Dr. Harloff’s total number of tracked accounts to eight. However, the Emerging Market and other University Beta strategies recently added by Dr. Harloff just began trading, so they will not show up on the Theta website until they have three months of track record. The Investor Zone Team, has initiated tracking of its Long/Short Growth Strategy. The Investor Zone Team is a signal developer and the tracking account will show how those signals should have performed in actual trading. Theta Research has verified the actual performance of this model back to its inception of January 1, 2016. Do You Know an Investment Manager That Should be Listed on Theta’s Database? Investment Managers are always seeking to find ways to attract the attention of individual investors, institutions and other Investment Advisors. This is especially true among those looking for strategies that seek to manage risks and provide uncorrelated returns. As Theta continues to grow, our focus on actively managed strategies is an attractive and low-cost way to not only document actual performance, but also have it verified by an independent third party. If you come across any active investment managers or signal developers who could use some market exposure, send them our way. Just have them call Mike Posey at (512) 826-5553, send an e-mail to Mike@ThetaResearch.com or contact us through our online contact form. If you prefer, you can also get in touch with Mike and he will make the initial contact.