Quantitative Investment Decisions, LLC (QID) is a Florida registered investment advisor. QID’s focus is on developing strategies that address investor behavior. The industry promotes and develops strategies to address diversification and capturing alpha, performance and risk aversion. Whereas, based on behavioral studies, investors appear to be loss adverse wanting reasonable upside in a bull market but with a focus on capital preservation in bear markets. An analysis of money market flows as a percent of mutual fund assets would indicate that the percentage of money market assets increases dramatically as market losses accelerate, 20% plus. The money market levels recede as the markets rebound, well after the recovery. The result as noted in the annual Dalbar studies is that investors capture less than half of the market index performances over time. Therefore, investor’s behavior indicates that they are loss not risk adverse.
The industry preaches to stay fully invested with diversification as a means of loss mitigation. The issue is that there are few strategies that focus on capital preservation to protect investors from extreme downside risk. As expected, during major economic events such as the bursting of the technology bubble in 2001-2003 and the mortgage meltdown of 2008-2009 most asset classes participated in the stock market carnage. The only asset class that maintained a negative or low correlation to the stock market in 2008-2009 was U.S. Treasuries. Therefore, the major benefits of diversification across asset classes failed investors when needed most.
Our CIO was the former Director of Merrill Lynch Manager Due Diligence. He focused on directing numerous studies evaluating the ability of manager performance measures to predict future success, persistence. The analysis concluded that the top 40th percentile of managers over three or five years had less than a 20% potential to repeat their performance over the ensuing period of time. Needless to say, performance ratios that depend on past performance were also of little value. Bottom line, using past performance is analogous to trying to drive your car using only the rear view mirror, you may be successful short-term but sooner or later you are likely to crash. The one measure that had the highest level of persistence was downside risk.
The results of the behavioral and performance studies led QID’s founders to develop proprietary algorithms with a unique attribute of a built-in downside protection mechanism that investors desire. The algorithm signaling engine provides binary (buy/sell) signals on each portfolio position delivering rules based discipline to investment decisions. The strategies algorithm implements defensive treasury/cash positions up to 100% during periods it identifies as having a high probability of market loss, a feature absent from buy and hold portfolios.
QID’s suite of Tactical Rotation Strategies can be used by investors to fill a particular asset class exposure desired or as a portfolio solution. QID’s strategies currently provide investor’s exposure to global, U.S. and international equity as well as fixed-income and alternative asset classes for the diversification investors need. Within each asset class the use of ETF’s provides a secondary level of diversification to avoid the specific risk of any one security. The alternative asset strategy uses agriculture, energy, precious metals and REIT ETF’s.
Our firm may be considered emerging but our portfolio manager’s signals have been used to manage nearly $1 billion in assets in our fixed-income and alternative strategies. QID’s equity strategies are built off of the same algorithm and appear to have the same downside risk defensive capabilities over their history.
QID provides investors an investment experience that we believe suits their behavior: upside performance capture in bull markets and downside protection in bear markets. By providing investors the diversification they need with the downside protection they desire, we believe we can keep investors fully invested through market cycles. By improving the probability of investors meeting their financial goals with greater long term asset growth, we believe everyone wins.
QID is deemed compliant with the Global Investment Performance Standards (GIPS®) by Ashland Partners & Company, LLP.
QID is in the process of having its strategies approved as Qualified Default Investment Alternative (QDIA).
QID is acquiring an industry leading ERISA client service desk as a value add to our partners/advisors.