Dynamic Asset Allocation Investment Process

• Select the most effective set of ETFs for Chapoquoit Dynamic Portfolios.
• Select market/macroeconomic factors that influence the selected ETFs.
• Set practical asset allocation limits.
• Revise the optimal allocation control function coefficients monthly.
• Analyze a 20-year performance of the model on an historical research basis.

• Employ our patented dynamic asset allocation process investing in equity, commodity and fixed income ETF investments.
• Generate adaptive asset allocation control functions from monthly market and macroeconomic factors based on data beginning in 1973.
• Apply the optimal control functions to obtain next month’s allocations.
• Control historical monthly portfolio performance, not individual investment averages.
• Create three separately-managed account levels of risk control: Conservative, Moderate and Aggressive.
• Repeat this iterative investment process on a monthly basis.

Example of a Set of Simple Asset Allocation Control Functions

• Alloc Stocks = 13+10 DivYield - 8 BondYield
• Alloc Bonds = 19 - 6 DivYield + 7 BondYield
• Alloc T-bills = 68 - 4 DivYield + 1 BondYield

Interpretation of Example

• When the Dividend Yield changes by 1 unit:
  • The allocation to Stocks goes up 10%,
  • The allocation to Bonds goes down 6%,
  • The allocation to T-Bills goes down 4%,
• When the Bond Yield changes by 1 unit,
  • The allocation to Stocks goes down 8%,
  • The allocation to Bonds goes up 7%,
  • The allocation to T-Bills goes up 1%,
• Allocations sum to 100 for any value of DivYield and BondYield.

• Chapoquoit is a purely quantitative approach.
• Asset allocations are adjusted once a month.
• Changes in macroeconomic and market factors control allocation changes.
• Discretionary overrides are never employed.
• Chapoquoit seeks to minimize absolute losses over market cycles.