A long-term portfolio designed to perform at all times of the economic cycle and with 100% automated decision-making. The model is monthly and dynamic, working with eleven ETFs of different asset classes and different behaviors within the movements of the economic cycle. It uses a monthly reading of macroeconomic inputs, which feeds signals to adjust the weight of the ETFs depending on the cyclical variations (and the strength of the variations) that occur over the quarters.
The same macro model as the American Dream Traditional, but for investors with less risk appetite. When stages of asymmetric variation in the correlation between the main asset classes emerge, they can feed a greater possibility of risk contribution overlap between the classes. The portfolio then agnostically reduces the positioning and adds a new variable, the Cash Signal (Dollar Index), which can vary in weight from 15% to 45% depending on the level of variation in the correlation distribution.
Long-term portfolio designed to perform at all times of the economic cycle and with 100% automated decision-making. The only difference between American Dream Original and Cash Signal is the monthly monitoring of the variation in the (annualized) correlation between the performance of high-credit quality fixed-income assets and variable-income assets. Once detected, the correlation present in the monthly variations between the two main asset classes is not significant. Statistically, the model increases the cash flow to 50% agnostically.
Within the retrospective analysis of the American Dream dynamic model since 2007, we have noticed that the moments of greatest fragility in the portfolio consist of market situations where there is a weakening in the statistical significance of the variation in the monthly correlation between the movements of US Treasury bonds versus the stock market (using the Wilshire 5000 Index, the 5,000 US stocks, as a variable).
Therefore, in order to create a macro-dynamic model for more moderate or conservative profiles, we decided to introduce the Cash Signal effect, which is similar to our Risk Parity Breadth Indicator.
In simple terms, when the correlation between 30-year Treasury bonds and the Wilshire 5000 falls below one standard deviation from the median, all of American Dream Original's allocation recommendations are 50% replaced by cash.
We used Optimal Asset Class Correlation studies as a basis, with backtests carried out since 1988. The study consists of initially detecting whether the American economy is between:
Greater exposure to stocks in cyclical and growth sectors. Greater partial reduction in fixed income with higher credit quality.
Greater reduction in exposure to cyclical and growth sector stocks, towards defensive sector stocks. Marginal increase in fixed income with higher credit quality and long duration.
Greater reduction in exposure to defensive sector stocks, towards fixed income with high credit quality and long duration. Beginning of a marginal increase in cyclical and growth stocks, in a timid manner.
Greater reduction in fixed income with higher credit quality. Aggressive increase oriented towards stocks in cyclical and growth sectors.
In order to assume where the economy stands, we use our scorecard for decision-making:
In this way, the portfolio will tend to adjust to the Expansion, Repair, Downturn, Recovery reading as a function of both the last two quarters and the strength of the variation in the leading indicators. In this way, we avoid false signals and at the same time navigate according to the economy with a delay in the reading of between 1-3 months, which defines the timing of the delay is precisely the confirmation of Coincident Index #1 in relation to the general signal by Leading Index #2.
Within the retrospective analysis of the American Dream dynamic model since 2007, we have noticed that the moments of greatest portfolio fragility occur in market situations where there is a weakening in the statistical significance of the variation in the monthly correlation between the movements of US Treasury bonds versus the stock market (using the Wilshire 5000 Index, the 5,000 US stocks, as a variable).
Thus, aiming at a macro-dynamic model for more moderate or conservative profiles, we introduced the Cash Signal effect, which is similar to our Risk Parity Breadth Indicator.
De forma simples, quando a correlação entre os bonds do Tesouro de 30 anos e o Wilshire 5000 fica abaixo de um desvio-padrão da mediana, todas as recomendações de alocação da American Dream Original são 50% substituídas por caixa.
The main static models have the option of adding to the strategy other asset classes that have a negative risk contribution during most of the cycle versus the investment philosophy. For example, the Fundamentals Balanced portfolio includes a 35% weighting in long US Treasuries and 5% in gold, the REITs portfolio includes Dollar Index.
The option to include the Balanced version is a way of further diversifying the portfolios.
Through studies that focus on the pattern of behavior between asset classes over various points in the cycle, the Diversification philosophy seeks to assemble a portfolio where the weights of several different asset classes complement each other over most points in the cycle. We take into account: that the economic and credit cycle points vary; and that the composition between different asset classes and the variations in correlations between them.
Com o nosso fundo de credito privado, oferecemos aos investidores a oportunidade de investir em uma carteira diversificada de empréstimos com garantia sênior, que se concentra na preservação do capital e retornos atraentes ajustados ao risco com distribuições trimestrais
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VTV
The cost of managing the portfolio follows the model in the table below (annual percentage), and is based on the Net Asset Value (net market value) of the portfolio. The contract can be canceled at no additional cost at any time, and the charge relates to the number of days under Plural's management. The charge occurs monthly or quarterly, depending on the custodian chosen
Depending on the custodian selected, there will be different brokerage charges per trade. However, we always look for the best brokerage costs and the best execution platform for stocks, bonds and options.
Brasil Plural Investment Advisors has no brokerage revenue.
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