The AERIUS Investment Models seek to generate superior returns with lower risk through active asset allocation and security selection.
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The performance of the AERIUS models has been tested on the entire period for which historical data is available going back to 1987. Performance prior to Jan 2016 is hypothetical using a retroactive application of the models with the benefit of the hindsight. No actual accounts have been invested using these models before that time. The models became publicly available since the beginning of 2016. Peformance reported after that time is net of fees and based on account sizes of $1mil or more. Performance reported prior to that time is gross of fees. See important disclosures.
The following charts show the returns and the risk of AERIUS models relative to each other and relative to the S&P500 index. Risk is expressed as percentage losses from the highest point achieved up to the current date.
In the "Logarithmic Chart" the scale on the left side represents multiples of the original investment. For example: 4.00 is four times the initial investment. If the investment was $100,000, level 4.00 represents a value of $400,000. Level 16.00 represents a value of $1,600,000.
The S&P 500 index is shown for informational purposes and is not necessarily a benchmark for the AERIUS portfolios.
An active investment manager provides value to investors relative to other available investment choices when either of the following two criteria are met:
The active strategy provides higher returns for about the same level of risk of loss.
The active strategy's returns are similar but has lower risk of loss.
AERIUS models include a number of active investment factors selected based on their potential to deliver lower risk and higher return.
Timing of changes in asset allocation
This is the proprietary signal for determining periods when equities are likely to generate positive returns. During "Risk ON" periods, models allocate a certain portion of assets to equities. During "Risk OFF" periods, models sell stock positions and allocate the entire portfolio to fixed income assets.
Asset class selection
The mix of investment choices for AERIUS models is restricted to high-quality assets showing some of the most attractive risk/return profile. The asset classes have a long track record that extends back 30 years or more.
This technique reduces risk of loss in the portfolio by allocating to assets that tend to be inversely correlated: when the price of one asset declines the other increases. AERIUS models are interested primarily in correlations during times of intense stress in the financial markets. Natural heding is preferred to other forms of protection that incur costs and reduce returns, such as put options.
For certain asset classes such as equities, AERIUS models invest in a subset of securities which are selected according to certain criteria for delivering an optimized risk/return profile at the portfolio level.
Attempts to optimize the balance between risk versus return by adjusting the percentage of each asset and individual security in the portfolio according to the model's objectives.
Active Investment Factors
AERIUS Investment Models are based on quantitative analysis of thirty years of historical fundamental data from reports of companies that were part of the S&P 500 index. This would not be possible without the availability of advanced tools and computing power.
Most of the companies that were part of the index over such a long time have been removed, closed or have merged. For that reason, the information required can only be found in specialized databases
Maintaining the accuracy of analysis also required information that is free from revisions. Companies often revise the quarterly reports. Economic numbers such as GDP growth also get revised. Performing analysis based on revised data would introduce a look-ahead bias that would create wrong and misleading results.