**New Model** Trade Alert – SV Core Factor Rotation Portfolio
We launched a new model on January 2nd called the Factor Rotation Model. Historically, the performance of value and growth factors relative to the S&P 500 exhibits a strong negative correlation. Michael Lebowitz provided an overview of this concept in his piece: Relative Rotation – Unlocking the Hidden Potential Part 1. While the article uses a simplified example, it highlights the philosophy behind our new Factor Rotation Model. The graph below from the article exemplifies our motivation for creating this model.
**The model’s initial trades were completed on January 2nd, but due to technical difficulties, we were unable to post the trades to SimpleVisor until January 6th. All trades will be posted in real time going forward, as they are with all of our other models. Please click HERE for a list of the initial trades.
The model is fully allocated to equities, aiming to outperform the S&P 500 over the long term by strategically rotating between value and growth exposures. Trading signals are generated by our proprietary, rules-based quantitative model.
The model has two primary allocation states: overweight value/underweight growth or overweight growth/underweight value. The model targets an 80/20 allocation split between the two factors. Trading signals may persist for as little as one month or longer than one year. Given the possibility of high turnover, the model may not be appropriate for tax-sensitive individuals. The model may be rebalanced without a trading signal on occasion.
The current signal indicates an overweight in value; thus, we’ve allocated the model accordingly at launch.
The model has more inputs than our SimpleVisor absolute and relative factor analysis tool. However, the factor analysis tool is useful for assessing how the market shifts between growth and value.
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Nick Lane
Nick Lane Portfolio Manager, MS, CFA®
Nick earned an undergraduate business degree with a double major in finance and accounting and a Master of Science in finance from the University of Houston. While earning his graduate degree, Nick was an analyst and portfolio manager for the Cougar Investment Fund, the Bauer College of Business investment fund managed by select graduate students. Nick spends much of his spare time indulging in his passion for the outdoors via bass fishing, fly fishing for trout, saltwater fishing, and hunting, as well as spending quality time with his wife. Nick resides in Jersey Village with his wife, Vivianne, and their two dogs and cats.