As we near the end of 2010, one might think that investors are focused on the fact that the S&P 500 is on track to post another double-digit return or that it has had a spectacular recovery since the March 2009 bear market lows. Yet, I don’t think that is where investors are focused. If they were focused on the powerful returns in the stock market over the last year and a half, then one would think that they would quit pulling money out of domestic equity funds. Yet domestic equity funds had another $1.8 billion in redemptions just last week, bringing the total redemptions for 2010 to $81 billion.
Rather, investors are focused on what it will take to get back to their portfolio value at the end of 2007. Furthermore, they are wondering when the next 2008 will come along. As their financial advisor, whether or not you believe that another 2008 is just around the corner is somewhat irrelevant. Your clients think there is a distinct possibility that we are not out of the woods with this financial crisis and they are demanding a strategy that will seek to deal with that possibility.
Enter the Dorsey Wright Global Macro strategy. This global tactical asset allocation strategy can invest in U.S. equities (long and inverse), international equities (long and inverse), currencies, commodities, real estate, and fixed income. The mandate of this strategy is to seek out the strongest trends regardless of where they are found. Furthermore, the mandate of the strategy is to have the flexibility to shift into those asset classes that are potentially holding up when all else is falling apart-even if that means exposure to inverse equities.
The chart below can help answer both of the primary questions that investors have: how did Global Macro deal with 2008 and how does the current value compare to the portfolio value at the end of 2007.
(Click to Enlarge)
As shown above, the Global Macro strategy did not experience nearly as much of a drawdown in 2008 as the S&P 500, 60/40 Portfolio, or the 33/33/33 Porfolio. Furthermore, as of the end of November 2010 it is the only strategy of the four that is above its 2007 value. Only after answering those questions (drawdown in 2008 and current value relative to value at the end of 2007) do clients want to hear about how well a strategy can do in the good times.
To receive the brochure for our Global Macro strategy, click here. For information about the Arrow DWA Tactical Fund (DWTFX), click here.
Click here and here for disclosures. Past performance is no guarantee of future returns.
HT: GF
