Almost everyone agrees that it is too risky to stay completely invested in the stock market at all times. This is why investors use “hedges”, e.g., going to cash when risk is high. Most hedging strategies, however, are put on too early or taken off too late. Hedging too early causes whipsaw that eats returns. Whereas taking a hedge off too late causes investors to miss the often highly profitable early stages of a new uptrend. The Valarian Equity Exposure strategy seeks to provide protection to equity portfolios by hedging only against markets vulnerable to a significant correction as defined by quantitative rules. We prefer to stay invested in bull and sideways markets as much as possible. Likewise, when in cash, the strategy attempts to identify new uptrends as quickly as possible in order to exit the hedge. The strategy is best used in signal form to help investment advisors and large investors control their equity exposure. It is also available as a SMA or subadvisor. Key features include:
Past performance of any Kerns Valarian strategy is not an indication of future results. There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. Investing involves risk and possible loss of principal, including foreign currency exchange rates, political risks, market risk, interest rate risk, different methods of accounting and financial reporting. Investors should carefully consider the investment objectives, risk and expenses of any investment strategy before investing.
VAMI means Value Added Monthly Index. The returns shown reflect an index of the strategy. Strategy performance does not reflect any management fees, transaction costs or other expenses that would be incurred by a portfolio or fund, or brokerage commissions on transactions. Such fees, expenses and commissions would reduce returns.
All information presented prior to the live date of any Kerns Valarian strategy is back-tested and hypothetical and provided for informational purposes only to indicate historical performance had the index strategy been available over the relevant time period. Backtested performance does not represent actual performance and should not be interpreted as such. Backtested performance results have certain limitations. Such results do not represent the impact that material economic and market factors might have on an investment adviser’s decision-making process if the adviser were actually managing client money. Backtested performance also differs from actual performance because it is achieved through retroactive application of model strategies designed with the benefit of hindsight. As a result, the strategy theoretically may be changed from time to time and the effect on performance results could be unfavorable. No hypothetical record can completely account for the impact of financial risk in actual trading. Further, the material market and economic conditions during the backtest are unlikely to repeat.
The results shown reflect the reinvestment of dividends, earnings and capital gains with period rebalancing. If client accounts are rebalanced using different periods, it will affect returns. Tax liability has not been deducted from any performance results. Taxes will reduce client returns significantly. Actual performance for client accounts may be materially lower than the index strategies. Clients should consult their account statement for information how their actual performance compares to that of the strategy index.
For all data periods, annualized standard deviation is presented by multiplying monthly standard deviation by the square root of 12. Please note that the number computed from daily, weekly or annual data will differ.
The S&P 500 Total Return Index is the dividend-adjusted return of the S&P 500 Index. The S&P 500 is a representative sample of 500 leading large cap companies in leading industries of the US economy. It is widely regarded as the best single gauge of the US equities market. Source: Standard & Poor’s.
The Barclay Hedge Fund Index is a measure of the average return of all hedge funds (excepting Funds of Funds) in the Barclay database. Source: Barclay. Investors are not able to invest directly in the indices referenced in this illustration and unmanaged index returns do not reflect any fees, expenses or sales charges. The referenced indices are shown for general market comparisons.
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