Theta Research Valuation Methodology
The Theta Research (“Theta”) performance data is calculated based on the activity and valuation of an actual representative managed account traded by the Investment Manager to mimic all other accounts using the same strategic model. Valuations and transaction information for all daily tracked programs is obtained via a direct daily download from Guggenheim/ Rydex Funds or ProFunds.
For monthly tracked programs, Theta seeks to gain access to transaction and valuation information directly from a third-party custodian, brokerage or mutual fund using online access. When online access is not feasible, paper statements from the third-party custodian or their equivalent may be substituted.
Results are net of management and other fees and expenses and include reinvestment of any dividends or earnings. Wherever possible, fees are based on actual fee withdrawals from the account. However, when actual fee withdrawals are not feasible, such as in an IRA account owned by the Investment Manager, the appropriate “synthetic” fees are calculated and the affected track records are adjusted accordingly.
The synthetic fee calculation is based on the Investment Manager’s highest fee charged to a retail client and will vary from Manager to Manager. Synthetic fees are calculated in arrears for all models and differ based on tracking frequency. For daily tracked strategies, synthetic fees are calculated based on the average daily value of the account over the prior quarter, while synthetic fees for monthly tracked models are based on the prior quarter’s ending value, as provided by the custodian.
All synthetic fees are assumed to be taken against the account on the first trading day of each calendar quarter. Actual fees may be withdrawn at a different time and could result in a slight performance variance.
Theta’s performance tracking service works best on accounts that have few or no additions or withdrawals, but recognizes that this is not always feasible. In cases where additions and/or withdrawals are made on daily tracked accounts, such transactions are automatically represented in the daily valuation downloads and reflected in performance calculations. For monthly tracked accounts, additions are assumed to have occurred at the beginning of the month and withdrawals at the end of the month, although they may have actually occurred on different days. This could impact the reported performance during that month.
Theta’s performance data may include historical returns that were before Theta began tracking the performance of the model. In such cases, Theta employs the same techniques described above to verify actual daily or monthly performance as evidenced in statements or data downloads obtained from a third-party custodian or mutual fund representing real-time trading in an actual representative account.
Past performance is not necessarily indicative of future results. Consult with your investment advisor prior to making any investment.
Theta’s performance verification process is not an “audit” as that term is defined by the American Institute of Certified Public Accountants (AICPA) nor is it synonymous with the Global Investment Performance Standards (GIPS) certification. The word “audit” means something very specific in the realm of accounting and is not easily applied by non-accountants even when strict guidelines are followed. Thus, Theta does not claim to publish audited returns. All of the results published by Theta are verified and are derived from statements of actual trading accounts and not simply manager-reported numbers. It is therefore accurate to say that the performance results are actual results verified by an independent third party.
Historical track records can be reconstructed by Theta under certain conditions, specifically where there is an unbroken series of past statements for the account, only one model has been traded in the account and in which are infrequent additions and/or withdrawals in the account. The inception dates of reconstructed track records are provided by Investment Managers and are assumed to be accurate. While Theta seeks to discover the oldest trading history, there is no guarantee that the reconstructed track record produced by Theta consists of all time periods the model may have been traded.
Every effort is made to represent performance data accurately from sources believed to be reliable but errors do occasionally occur. If there are errors, whether they are because of a problem with the source data received from custodians, a computer error or human error on Theta’s part, Theta commits to correcting any such errors as soon as possible after they are brought to Theta’s attention. Theta assumes no responsibility for damages due to errors or omissions, nor does Theta guarantee the accuracy of any source information provided by brokerage firms, mutual fund companies or other custodians.
As tools for comparison, certain benchmark index products may be used, the trademarks and service marks of which are properties of their respective owners. Benchmarks represent unmanaged, passive buy-and-hold strategies and are designed to illustrate specific equity and bond markets. The volatility and investment characteristics of these indexes may differ materially (more or less) from that of the managed account models documented by Theta.
The results in accounts tracked by Theta may not reflect the performance of any actual client accounts due to the effects of contributions and withdrawals from client accounts, tax loss sales, client-imposed investment restrictions and other factors.
Backup data is archived for both daily and monthly tracked programs. For daily tracked programs trading through Guggenheim/Rydex or ProFunds, the archival data may be found on the fund company’s website. For monthly tracked programs, input data is archived by Theta on a secure internal storage device.
The information contained on Theta’s database is copyrighted and neither Investment Managers nor Subscribers may use or reproduce this information without Theta’s prior written approval.