bts multi-strategy - BTS Asset Management

Your total investment solution…
Benefit from three risk-managed investment
strategies… All in one account
BTS MULTI-STRATEGY
Portfolios
A COMPREHENSIVE INVESTMENT SOLUTION THAT SEEKS TO:
• Enhance returns
• Diversify investment strategies
• Reduce volatility
• Manage risk effectively
The BTS Multi-Strategy Portfolios
Program Snapshot
Multi-Strategy Portfolios enables BTS Asset
Management to provide a diversified investment
approach that combines three of BTS’ popular
investment programs.
These three programs together seek to enhance returns
while maintaining a predetermined risk balance to avoid
over-emphasizing any single category.
The three strategies employed are:
Select Seasonality
with Select Bond Asset
Allocation
Alpha Strategic
Asset Allocation
BTS utilizes two distinct investment allocation approaches
to build the core and satellite holdings of the Multi-Strategy
Portfolios:
Select Bond Asset Allocation
1. Strategic Asset Allocation involves quarterly rebalancing
and reallocation of a portfolio with the goal of achieving long term
risk and return objectives. BTS offers a highly evolved approach to
strategic asset allocation through our Alpha Asset Allocation Strategy.
2. Tactical Asset Allocation is an active management strategy
that shifts assets in order to take advantage of strong market trends.
BTS employs this strategy in two separate sections of Multi-Strategy:
Select Bond Asset Allocation, and Select Seasonality with Select Bond
Asset Allocation. Both of these strategies were developed with
the goal to minimize risk and maximize returns in a portfolio.
THE MULTI-STRATEGY PORTFOLIOS OFFER
FOUR LEVELS OF RISK:
Aggressive Growth
Growth
Moderate
Conservative
The Strategies – A Closer Look
1. Alpha Strategic Asset Allocation (Alpha SAA)
Alpha SAA’s inspiration comes from the work done in
the 1950s by Harry Markowitz. Markowitz received the
1990 Nobel Prize in Economics for his work on MeanVariance Optimization (MVO) and financial economics.
Mean-variance optimization is an accurate, elegant
solution to portfolio selection, only if the past is a perfect
picture of the future. MVO assumes that markets are
efficient and that there is no room for tactical asset
allocation. However, history has shown that markets are,
indeed, inefficient.
The tactical approach used during the portfolio selection
and allocation process can improve performance and
reduce volatility beyond what can be expected with
MVO. The reason for this is that if any two different 5-year or
10-year periods of any asset category are examined, the same
level of return or risk is not produced. BTS believes that
MVO should only serve as a first step in SAA portfolio
construction, not the last.
BTS utilizes the input of some of the best known
companies in the industry: Decision Economics,
Morningstar and Ibbotson Associates. BTS, with the
assistance of these firms, has developed a new approach
that allows clients to benefit from diligent fund selection
and allocation decisions.
2. Select Bond Asset Allocation (BAA)
Although millions of investors utilize bond mutual
funds, few are aware of the significant differences in the
year-to-year rates of return among major bond fund sectors.
During the historically unfavorable months for equities
from approximately May through October, assets are
switched to the BAA strategy, including the Plus
Option as outlined at left.
Assets may be invested in:
BTS employs a tactical approach to investing in
the bond sector that BTS believes will appreciate
the most in the near term, attempting to outperform a buy and hold strategy while reducing risk
and preserving capital.
Equities
High Yield
The Select Bond Asset Allocation strategy invests in
any of these four mutual fund bond categories:
U.S. Government
Money Market
Inverse High Yield
(Optional)
High Yield
U.S. Government
Money Market
Inverse High Yield
BTS Multi-Strategy Portfolios
Hypothetical Allocations
(Optional)
Aggressive Growth Portfolio
Growth Portfolio
Moderate Portfolio
Conservative Portfolio
BAA Plus Option Available
The Moderate, Growth and Aggressive Growth portfolios offer a “Plus Option”. The Plus Option allows for
the use of inverse (short) high yield funds1. Due to the
strong correlation between equities and high yields, if
there is strong downside movement with high yields
and equities, BTS can short high yields and potentially
reduce or eliminate losses in the portfolio. This inverse
position gives BTS a chance to control downside risk.
3. Select Seasonality with Select Bond Asset Allocation
This BTS strategy seeks to profit from seasonal market
patterns by investing in stock funds during the historically
favorable months of the year for equities, approximately
November through April.
BTS attempts to further enhance returns by utilizing
our proprietary model to determine exit and entry
points. BTS also employs stop-loss protection to
preserve principal in declining markets.
Alpha Strategic Asset Allocation
Select Bond Asset Allocation
Select Seasonality with Select Bond Asset Allocation
1 - Investing in short or inverse mutual funds (funds designed to profit from declining securities prices) involves certain risks that may include increased volatility due to the funds’
possible use of short sales of securities and derivatives such as options and futures. The use of leverage by a mutual fund increases risk to the fund. The more a fund invests in
leveraged instruments, the more the leverage will magnify any gains or losses on those investments.
How BTS Manages the Portfolios
Past Performance Cannot Guarantee Future Results.
By utilizing these three different strategies, BTS is
able to take advantage of today’s quickly changing
market environment providing you with a truly
diversified investment approach designed to maximize
returns while emphasizing risk management.
The allocation of assets and implementation of portfolio
management is subject to uncertainties. Loss of capital
is possible. BTS advisory fees are described in detail in
Part 2 of BTS’ current ADV and BTS’ client agreement.
There is no guarantee that BTS advisory programs will
achieve the stated or investor goals.
Multi-Strategy employs a micro and macro
approach to portfolio management:
MICRO APPROACH TO EACH OF THE THREE STRATEGIES:
• Fund Evaluation
• Economic Analysis
• Technical Analysis
• Qualitative Analysis
• Quantitative Analysis
MACRO
APPROACH TO OVERALL PORTFOLIO:
• Seeks to maximize return
• Seeks to minimize risk
• Rebalance quarterly
• Reallocate quarterly
Investments in mutual funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve their value at $1.00 per share, it is possible to lose
money by investing in money market funds.
Investors should consider the investment objectives, risks, and charges and expenses of the investment companies
carefully before investing. The prospectuses contain this and other information about the investment companies.
Please call your financial representative to obtain mutual fund prospectuses. Prospectuses should be read carefully
before investing.
Founded in 1979, BTS is recognized as one of the nation’s premier investment managers
providing risk-management services for mutual fund and variable annuity clients.
BTS ASSET MANAGEMENT, INC.
420 Bedford Street, Suite 340
Lexington, MA 02420
Toll Free: 800.343.3040
Fax: 781.860.9051
Email: [email protected]
Website: www.btsmanagement.com
BTS is affiliated with BTS Securities Corporation
© Copyright March 2008 by BTS Asset Management, Lexington, MA 02420