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Patented<sup>*</sup> Macroeconomic Investment Process That Learns From The Past Seeking to Minimize Risk of Loss

Patented* Macroeconomic Investment Process That Learns From The Past Seeking to Minimize Risk of Loss

  • Chapoquoit Dynamic Portfolios employs a quantitative investment process based on an advanced Linear Programming formulation that learns from past macroeconomic conditions.  Some refer to this type of approach as Artificial Intelligence (A.I.).
  • Our models focus on defending against severe losses. Chapoquoit believes that limiting the impact of large losses that are regularly suffered by equities is the key to investment success. We do this by monitoring fundamental macroeconomic factors that influence portfolio performance.
  • Chapoquoit’s patented Dynamic Asset Allocation Control Functions simultaneously change allocations to Exchange Traded Funds within sectors of equities, fixed income and commodities. Our models are designed to reduce an investors anxiety in the investment process. 
  • Chapoquoit’s tactical A.I. strategy is completely quantitative and does not allow discretionary overrides. Chapoquoit Dynamic Portfolios are offered as separately managed accounts. They are also available on various broker and TAMP platforms.

What You Need To Know

  • How is Chapoquoit related to Artificial Intelligence?

    Artificial Intelligence is a mathematical or logical procedure used to solve complex decision problems. In Artificial Intelligence, the procedure learns solutions to problems from large quantities of historical data. An example of artificial intelligence is Facial Recognition: the use of stored facial measurements of known individuals to later identify them from facial imagery. For Chapoquoit, we employ monthly data back to the 1970’s on the returns of multiple investments and the values of a set of macroeconomic factors to deduce the optimal way to dynamically change asset allocations.

  • What is Linear Programming?

    Linear Programming is a mathematical procedure that optimizes a linear objective function while satisfying a large number of linear constraints. An example of the use of linear programming is the process by which an oil refinery is controlled to produce needed minimal percentages of gasoline, jet fuel, heating oil and other distillates in order to maximize the profit from the refinery. For Chapoquoit, the changing allocations must sum to 100% for every month of history in a way that produces an historical target return and minimizes the sum of portfolio losses.

  • What are Macroeconomic Factors?

    Macroeconomic Factors used by Chapoquoit are measures of the economic or market environment that are logically related to the performance of investments. Examples of macroeconomic factors include the unemployment rate, 10-year government bond yield, S&P500 dividend yield, manufacturing capacity utilization, and the interest rate credit spread. Chapoquoit’s set of 20 macroeconomic factors was determined through extensive research. This proprietary set of factors directly impacts our performance and marketing edge.

  • What Investments are Employed by Chapoquoit?

    Chapoquoit Employs 30 ETF Investments that represent a range of U.S. equity sectors, foreign equity sectors, fixed income sectors, and several commodities. Using this broad set of investments can be classified as a global macro approach.

  • What are Dynamic Asset Allocation Control Functions?

    Dynamic Asset Allocation Control Functions are linear functions of macroeconomic factors used to control the time-changing asset allocations. Each investment in the Chapoquoit model has its own asset allocation control function. For example, the asset allocation control function for a 10-Year Government Bond ETF might look like:

    10-Year Government Bond ETF Allocation = α + β1 (Unemployment) + β2 (10-Year Bond Yield) + β3 (S&P500 Dividend Yield) + … βn (Factor n)

    Where the unknown coefficients (α, β1, β2, β3 … βn) are determined simultaneously for every investment through the use of linear programming. This is done in a way that produces an historical target return and minimizes the sum of portfolio losses.

  • What Measure of Portfolio Risk does Chapoquoit Utilize?

    The Portfolio Risk Measure employed by Chapoquoit is the average value of the portfolio loss in those months when the portfolio suffers a negative return. This is a true downside-risk measure. The optimization process seeks to keep this measure to a minimum.

Meet Our Portfolio Team

Put a century of combined experience to work for you.

Philip G. Nehro, CFP®

Investment Advisor Representative

(508) 495-9555


Phil joined First National Corporation in 2008 as an Investment Advisor Representative to establish a business that delivers an unparalleled investment approach to clients. Prior to joining First National Corporation, he served as a...

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Richard E. Oberuc

Investment Advisor Representative

(941) 822-8506


Richard joined First National Corporation in 2008 as an Investment Advisor Representative. He is responsible for the development of the investment techniques employed by Chapoquoit Separately Managed Accounts. He devised the Dynamic...
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