55 Capital, an investment manager delivering dynamically managed portfolios using exchange-traded funds (ETFs), has launched its inaugural suite of strategies designed to provide advisers and investors with portfolios using techniques broadly used by institutional investors to manage risk and enhance returns.
The 55 Capital suite of dynamically managed strategies will initially be offered in separately managed accounts (SMAs) and limited partnership (LP) vehicles. The goal is to use the rich landscape to provide access to a broad range of return drivers. It seeks to provide greater diversification, reduced volatility and improved returns over traditional 60/40 global equity/bond portfolios.
The three key tenets underpinning 55 Capital's investment approach are: use rigorous financial and investment research, create portfolios using 100 per cent ETFs and be highly tax efficient. The five strategies are managed with a research-based, risk-based and rules-based approach and consist of the following:
• Dynamic Macro: is 55 Capital's flagship strategy providing a multi-asset class offering that uses equities, fixed income, absolute return, commodities, and currencies exposures. The strategy dynamically allocates both across asset classes and on a more granular level within asset classes. This strategy had the highest risk-adjusted returns of the five strategies during the 12-year testing period.
• Enhanced Macro: has a fixed allocation to equity, bonds and alternatives, while having a dynamic allocation within each asset class to provide higher returns with lower portfolio volatility.
• Global Allocation: dynamically allocates between three equity (US, developed and emerging) and three fixed income asset classes (US credit and US/emerging sovereign), seeking to deliver broad market benchmark type returns with reduced overall drawdowns.
• Global Equity: delivers US, developed and emerging markets equity exposures with a downside risk-oriented framework to deliver broad equity exposure.
• Alternatives: provides a transparent substitute for bond allocations using absolute return, commodities and currencies exposures.
"There is a crisis in investing. Advisers and investors have more tools at their disposal than ever before, but with a lower return market environment, portfolio construction is more important than ever before. We can no longer rely on what we were all taught for decades, that the 60/40 portfolio will help investors achieve their goals," says Lee Kranefuss, co-chairman of 55 Capital. "The expansive ETF landscape has become more challenging and more complicated, creating new hurdles for investors. 55 Capital's goal is to provide a well-diversified core portfolio that has more return drivers and more active management of risk, tax and performance than most investors have access to today.”
“We're in a low yield market environment, and there are more macro risks to navigate. In addition, security selection and buy-and-hold investing no longer works for many investors. We believe the best way to manage capital is to gain exposure to a variety of return drivers and to dynamically manage exposures to these sources of returns for downside protection. We also believe that ETFs represent the most transparent, cost-effective way for a wide range of investors to gain diversified, global, tax-efficient exposure in their portfolios," says Dr Vinay Nair, co-chairman of 55 Capital.
