Most sector rotation strategies and funds exclusively invest in equity sectors. However, even defensive sectors like utilities, staples and health care lost at least 15% in 2008. Accordingly, equity-only sector strategies can suffer in a bear market when all equities suffer. The Valarian Sector Strength strategy uses 13 sectors plus non-correlated assets such as treasuries and gold. In addition, the strategy may hold cash, and may devote a portion of the allocation to short the S&P 500. The Valarian Sector Strength strategy seeks to invest in strong performing sectors in bull markets, and protect portfolios in bear markets. The strategy is available as a separately managed account (“SMA”) for institutional investors, as a subadvisor to the clients of investment advisors (requires trading authorization), or as signals for investment advisors who wish to retain trading control. 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.
The strategy invests in several distinct asset classes, including large cap domestic stock sectors, US Treasuries, gold and an unleveraged S&P short. Each of these asset classes has its own set of investment characteristics and risks and investors should consider these risks carefully prior to making any investments. Strategies whose investments may be concentrated in a specific industry or sector may be subject to a higher degree of market risk than more diversified strategies, and may not be suitable for all investors. A concentrated portfolio may add a measure of volatility to performance, as a major fluctuation in any one holding will likely affect the strategy more than portfolio with greater diversification. Investments in US Treasuries may have greater volatility than investments in traditional securities. The value of treasury-linked instruments may be affected by changes in overall market movements, bond market volatility, changes in interest rates, international economic, political and regulatory developments. Investments in commodities may have greater volatility than investments in traditional securities. The value of commodity-linked instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
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