QID has developed a suite of tactical strategies that all share a common theme – protect the investor’s assets in the event of an extended market downturn. QID currently offers five styles of tactical portfolios: U.S. equity, international equity, global equity, global fixed income, and alternative investments.
All strategies incorporate a downside risk protection mechanism that provides a disciplined process to raise cash and reduce equity and/or debt market exposure during volatile market periods. A quantitative signaling engine provides binary (buy/sell) “signals” on each portfolio position.
Exchange traded funds (ETFs) are used to represent each sector, sub-sector, asset class, and/or international market that is held in a portfolio. The ETFs used in each portfolio are selected from the universe of Exchange Traded Funds (ETFs) and may come from a single sponsor or multiple sponsors. A proprietary scoring system, which considers such factors as tracking error, cost efficiency, and liquidity, is utilized to determine the specific ETFs that are used in each portfolio.
Each strategy employs a 100% quantitative investment process that produces a binary (on/off – own/don’t own) signal for each ETF held in a portfolio. Within each portfolio, a unique weighting system is used that is dependent on the number of sectors, sub-sectors or asset classes held in each category of the portfolio. The system will determine if an asset class or sector is over, under, or equal weighted, and, in general, is designed to avoid holding a position or increasing the weight of a position, that demonstrates a high likelihood to signal “off” or decline in value in the near term. A defensive position (i.e. cash equivalents/U.S. Treasury instruments) will begin to build when the number of ETFs, representing each sector, region, or asset class, falls below a certain threshold.
In addition to the standard tactical portfolios, QID also offers an “Adaptive” strategy version for the U.S. equity and the international equity portfolios. The systems controlling the signals of the adaptive strategies tend to react at a slower pace to changes, vs. the tactical strategies, thus resulting in a lower turnover. Long term, the tactical and adaptive models tend to provide similar results, however, due to the lower turnover, the adaptive strategy may be more tax efficient.
For investors who desire a risk-based or age-based portfolio, QID offers several predetermined Diversified Portfolios. Each portfolio includes the four major asset classes: U.S. equity, non-U.S. equity, fixed income, and alternative assets. In addition to the predetermined models, each strategy can also be customized to meet an investor’s unique circumstances and needs.