The plan to achieve these mandates is based on our adaptive method of portfolio strategy blending employing multiple investment managers, multiple strategies, and multiple timeframes. This dynamic process quantitatively blends investment strategies. As such, when market conditions change, so too does the blend of investment managers and strategies utilized in the fund. The fund is built on a strategic aggressive core allocation reflecting an approximate 85/15 stocks versus bonds mix. From there, strategies employing stock selection, trend-following, relative strength, and mean-reversion approaches are blended to work as a single unit.
As stated in my previous fund discussion, many of the sub-strategies of this fund may also use levered or inverse ETFs to potentially enhance performance in differing market environments. Allocations among the sub-strategies may further be dynamically adjusted according to their cross-correlation, relative trend, and volatility characteristics using a proprietary mechanism, permitting the concentration of strategies to further adapt to evolving markets. In sum, the AlphaGen Growth Fund is designed to seek steady, global growth-oriented returns featuring capital protective overlays and reduced market correlation without the inherent risks of a singular manager approach.
Hortz: How do you keep these group of strategies working together to attempt to outperform the fund’s benchmarks?
Horter: In short, our clearinghouse approach affords the funds the ability to adjust their allocations to strategists, managers and signal providers without changing the prospectus. The concept here is similar to how a manager runs a baseball team. We too maintain a deep “bench” of managers and strategies that can be put into the lineup at any time and/or as conditions warrant. The approach is designed to stay true to the funds’ tactical objectives by keeping a group of strategies working together while allowing adjustments to strategy use over time.
Hortz: Can you tell us a little bit about the strategy behind some of your other funds?
Horter: To do a quick recap:
TFA Moderate Allocation fund (TFAUX) — As the name implies, the fund is an active, tactically risk-managed fund utilizing a 50-70% equity allocation and 30-50% fixed income. While continuing to employ multiple managers and multiple strategies, the central focus of the fund is now to outpace the comparative benchmarks using a quantitatively driven rotation methodology that allows the fund to invest in any combination of sectors or asset classes. A capital protective algorithm is used to potentially minimize loss in a market downturn by moving investments towards significant cash or cash equivalent positions. We believe this modernized diversification approach provides the best potential to achieve the portfolio's risk and return objectives.
The TFA Growth Allocation Fund (TFAFX) — in a similar fashion but more aggressively, our Growth Allocation portfolio Is an active, tactically risk-managed growth allocation fund utilizing a 70-90% equity allocation and 10-30% fixed income. While continuing to employ multiple managers and multiple strategies, we recently added a 25% allocation to Howard Capital Management as a new sub-advisor to the fund specifically focused on alpha generation.
The TFA Quantitative Fund (TFAQX) — In January of 2022, the Quantitative Fund, which utilizes an aggressive, long-short approach, also became part of the multiple manager, multiple strategy, multiple timeframe “clearinghouse” fund lineup. Prior to the change, the fund had been managed using a single manager focusing on specific segments of the market. However, as the market environment evolved, the inherent limitations of a singular strategy became apparent. As such, we decided to add two managers and multiple investing strategies to the fund. As our most aggressively positioned growth fund, we felt it was important for the fund to have the ability to generate outperformance in differing market regimes.
Hortz: What about your other remaining fund? Does it employ a slightly different approach?
Horter: Our Multidimensional Tactical Fund (TFADX) is currently a single manager tactical fund. However, the manager of the fund does employ four different investment strategies in the fund. We view Multidimensional as our most risk-averse fund. In other words, it will move to risk-off in ANY of its positions very quickly. So, for those looking for a risk-managed strategy with a quick trigger finger on the sell side, Multidimensional is the ticket.
Hortz: Any recommendations for advisors on how to apply your fund strategies to their clients’ portfolios?
Horter: Each of our actively risk-managed tactical funds is designed to fit a specific risk-targeted segment of client portfolio. Armed with the proper expectations, we believe that the funds can be an integral part of every investor’s portfolio looking for outperforming the indices and benchmarks with heightened risk and volatility management.
As an example, TFA Tactical Income Fund as a non-traditional, risk-managed bond fund was designed for fixed income investors as a diversifier to traditional fixed income funds. Our equity funds were designed as modernized approaches for investors seeking non-traditional, dynamic, risk-managed approaches to further diversify their portfolios.
Hortz: Any other thoughts you would like to share with advisors?
Horter: We would like to invite advisors to look at us as a resource and visit our Tactical Investing blog on our website where we share our research and thought leadership on this ever more important investment approach of tactical investing and how to apply it. While there on our website, please take a good look at our Tactical funds where a number of our funds are quickly approaching their 3-year mark and, due to performance, we have high expectations of strong Morningstar ratings.
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