ETF Trends
ETF Trends

Depending on one’s investment objectives, risk tolerance and other factors when filling out a portfolio, investors have the ability to choose from a number of exchange traded fund model portfolios from various ETF strategists to help reach their retirement goals.

ETF Trends publisher Tom Lydon spoke with Julex Capital Management managing director Jeff Megar at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about types of dynamic investment portfolios that investors can implement to achieve their tactical and strategic allocation needs.

Megar explained that Julex Capital Management follows a very unique three step adaptive investment process.

“First determining the market environment, should we be in the market or out of the market,” Megar said. “Then we use momentum to determine which are the best ETFs, strongest performing ETFs to invest in. Lastly, we volatility weight our positions, so we can make a nice smooth ride for the investor.”

Julex Capital Management offers eight main model ETF portfolios, including strategies that cover equity/sectors, income, real assets, multi-assets and risk-based portfolio solutions.

For example, the Dynamic Sector Strategy aims to preserve capital in protracted down markets while still providing high level of participation in rising markets in an attempt to outperform over full market cycles. The portfolio largely consists of long U.S. equity exposure that targets the best sector and style ETFs.

The Dynamic Sector Strategy may hold State Street Global Advisors SPDR sector ETFs, along with various BlackRock iShares market cap-weighted growth and value ETFs, during risk-on market conditions. On the other hand, during risk-off conditions, the ETF model portfolio may shift to fixed-income assets, including broad Barclays Aggregate Bond Index exposure, Treasury inflation protected securities, Treasuries and cash alternatives.

“Tactical asset allocation (TAA) is a dynamic strategy that actively adjusts the asset weights in a portfolio based on the manager’s market views,” Julex Capital Management said in a note. “It is normally used as a complement to a strategic allocation in order to improve the risk/return profile of the total portfolio.”

The portfolios are able to shift positions from riskier to more conservative assets in changing market environments in an attempt to limit drawdowns while still maintaining upside potential, which may lead to outperformance over extended periods.

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