Chapoquoit 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.

Model Driven Investment Process with No Investment Discretion

Chapoquoit Investment Process- Website

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.

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