F-Squared is an investment management firm and an SEC registered investment advisor. Our innovative business model delivers three benefits not previously seen together in the industry:
- Low cost manufacturer for active investment solutions
- Unlimited investment options
- Multiple investment solutions, open architecture platform
- Access to portfolios that may be currently restricted or closed
- Customization capabilities – Low cost customization, short delivery cycles
We offer two suites of investment solutions for institutional investors:
Investment solutions are available as Institutional Separate Accounts and mutual funds (as of 9/30/2009, through our partner Virtus Investment Advisers).
For qualified investors or consultants, to contact an Institutional Sales Professional, see our Contact Us page.
ALPHASECTOR™ STRATEGIES
AlphaSector strategies utilize an investment approach known as Defensive Allocation, which is designed to limit losses rather than simply capture gains. However, AlphaSector is definitively not a “bear market” product.
When executed properly, such a strategy has the ability to outperform in normal markets (annual returns of 5% - 20%), outperform dramatically in down markets, and reduce overall volatility by as much as one-third. The following presentations provide additional insight into how Defensive Allocation and AlphaSector have performed historically, across both bull and bear markets. 1
F-SQUARED‘S SUITE OF ALPHASECTOR STRATEGIES PROVIDE INSTITUTIONAL INVESTORS THE FOLLOWING BENEFITS:
- AlphaSector Indexes have proven to limit downside losses, especially when it matters most to investors 2
- Stress tested in the bear markets of 2001/2002 and 2008/2009
- Limiting downside losses is absolutely critical in building and maintaining wealth
- Low fee, low complexity, high liquidity
- Long only approach, with no use of leverage or derivatives 3
- Historical performance has demonstrated: 2
- Capacity to reduce likelihood of loss
- Capacity to reduce likelihood of extreme loss
- Improved results for systematic withdrawal programs
- Capacity to outperform the market for normal markets and bear markets
– Level of outperformance increased as the returns of the S&P 500 worsened
APPLICATIONS INCLUDE:
- Alpha generation
- Structural risk reduction
- Systematic withdrawal or funding requirements
- Strategies that incorporate “fat-tail” events into their modeling
- Sub-advisory solutions
For more information about AlphaSector, please see the following presentation:
AlphaSector Presentation
APPROACH AND METHODOLOGY OF THE ALPHASECTOR INDEXES
All AlphaSector Indexes use disciplined buy and sell signals to build portfolios constructed from the major sectors of the S&P 500 and/or international markets.
AlphaSector Indexes only invest through a limited number of Exchange Traded Funds (ETFs), which provide ease of access, liquidity, transparency, and low transaction costs.
The domestic AlphaSector Indexes have an inception date of April 1, 2001. The Global and International AlphaSector Indexes have an inception date of April 1, 2003, although the performance data prior to March, 2009 reflects backtested data.
AlphaSector Indexes Philosophies and Methodologies
AlphaSector Monthly Allocations
AlphaSector Monthly Perfomance Since Inception
CUSTOM REPLICATION SOLUTIONS
F-Squared’s enabling technology, Portfolio Replication Technology (PoRT™), allows “cloning” of portfolios of virtually any equity mutual fund. The cloning process replicates the securities within the funds, not the expense ratio.
For more information about PoRT, please refer to the following presentation:
PoRT Overview
APPLICATIONS INCLUDE:
- Alpha generation:
- Replication of existing portfolio with reduced cost
- Custom design of multi-manager, multi-asset class investment solutions
- Downside risk management
- Construction of portfolio for shorting or hedging
- Sub-advisory
- Specialty Applications
- Insurance firm’s Variable Annuity guarantees – Industry’s first solution allowing hedging of active manager basis risk
- Executive Deferred Compensation Plans – Custom replication enabling fee reduction and ability to “recapture” capital allocated to owning mutual funds
- Company-owned Life Insurance (COLI) - Custom replication enabling fee reduction and ability to “recapture” capital allocated to owning mutual funds
F-SQUARED‘S PROPRIETARY CUSTOMIZED REPLICATION PROVIDES CONSULTANTS AND INSTITUTIONAL INVESTORS:
- Access to the performance of world class managers at below market minimums
- Fully integrated, multi-manager portfolio
- Open architecture platform
- Selection of a portfolio of any publicly listed domestic equity mutual fund (including funds closed to new investments)
– Selection can be based on manager preference or portfolio characteristics
- Optimal diversification of process and managers
- No restrictions on buy discipline or sell discipline (i.e. Board Approval)
- Board approval of concept rather than individual managers improves timeliness of manager changes
- Superior compliance and risk controls
- Transparency of holdings
- Internal control of operations including compliance, custody, trading and valuation
- No layering of fees
For more information about our Custom Replication Solutions, please see the following presentation:
Custom Replication Institutions Short
ALPHACYCLE™ STRATEGIES – PRE-PACKAGED OPTIONS
While our most popular replication option is a custom designed portfolio, F-Squared does offer a series of 18 “off-the-shelf” portfolios available for replication. These portfolios have been converted into public Indexes, published daily the NYSE Arca.
AlphaCycle Indexes are Indexes constructed exclusively from “best-in-class” actively managed mutual funds. The mutual funds comprising each Index are selected by one of three institutional consulting firms that “manage” the Indexes. The Indexes are reconstituted annually on or about February 15. For a full list of these strategies, please see our AlphaCycle section.
Investors do not purchase a portfolio of mutual funds, but instead invest in a portfolio of stocks, bonds, and ETFs that are constructed using F-Squared’s proprietary Portfolio Replication Technology (PoRT™).
The Indexes deliver many critical benefits to investors not traditionally available by investing directly into individual mutual funds, including diversification across management firms and investment process, active monitoring of fund performance, and active modification of the portfolio based upon weakening fundamentals of any mutual fund.
For more information about our AlphaCycle Indexes and their performance advantages, please see one of the following presentations:
AlphaCycle Overview.pdf
AlphaCycle Suite of Indexes Year End 2009 Performance
Legal:
1 ” Winning by Not Losing – The Hidden Power of Defensive Allocation”, F-Squared Investments, 6/09; Morningstar Direct; Active Index Solutions, LLC
2 Morningstar Direct; Active Index Solutions, LLC
3 Although AlphaSector Indexes do not short securities nor utilize leverage or derivatives, the ETFs that AlphaSector tracks may make use of such financial instruments or strategies.
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