Below is a brief performance overview of our “active indexes” through the first quarter.  Active indexes combine all the benefits of passive investing while still seeking to outperform the overall market over time.  Recently, we launched AlphaClone Mirror Portfolios to help individual investors incorporate active indexing into their retirmement plan.  Mirror Portfolios are an affordable and holistic investment solution, tailored to adjust to your investment objectives and risk tolerance as you approach your goals. Learn more about Mirror Portfolios

 

YTD Summary

AlphaClone Hedge Fund Downside Hedged Index (ALPHACLN)
+7.9% YTD vs. +5.9% for the S&P 500.

AlphaClone International Downside Hedged Index (ALFIIX)
+11.2% YTD vs. +7.8% for the MSCI All Country ex USA Index.

AlphaClone Small Cap Index (ALFSIX)
+6.9% YTD vs. +2.4% for the Russell 2000.

AlphaClone Activist Manager Index (ALFDIX)
+10.1% YTD vs. +5.9% for the S&P 500.

AlphaClone Value Manager Index (ALFVIX)
+7.6% YTD vs +3.1% for the Vanguard Value ETF (VTV).

 

Commentary

Markets adopted a “wait and see” posture in March as key policy initiatives from the Trump administration ran into political road blocks while the Fed signaled a potentially more aggressive monetary path.  Small cap stocks were on par with large cap for the month but continued to lag in the quarter.   As we highlighted in our February 2017 update, this is the first time in a decade where small cap stocks have not participated in a start of year rally, a potentially worrisome sign that investors are shying away from risk assets.

As uncertainty around monetary policy dissipates, (the direction of interest rate is in no doubt and the timing around increases has become more clear) it is being replaced by increasing political (and economic) uncertainty.  The effect has been a significant reduction in equity correlations this year (see figure below).  Low correlation environments are a big positive for active index strategies (like ours) which do well when the spread in value between “good stocks” and “bad stocks” is more pronounced.

March 2017 Correlations.png

The proof is in the pudding.  All five AlphaClone indexes finished the quarter ahead of their benchmarks.  With our index rebalanced on February 27, 2017, notable changes in positioning include a move away from US healthcare stocks in the ALPHACLN Index after being overweight the sector for many quarters.    Instead, anticipating a friendlier operating environment going forward, institutional investors with high Clones Scores aggressively bought US financial stocks in Q4.  Our ALPHACLN index now has financials as the largest allocation followed by technology.

In contrast to positioning in US markets, our international ALFIIX index continues to be overweight international healthcare names and underweight foreign financial stocks with a strong bias towards emerging markets compared to its benchmark.   All downside hedged Indexes remain long only going into Q2.

 

Download Performance Presentation

Download our March 2017 AlphaClone Active Index Performance Report to access:

  • What is an active index (slide 3)
  • Why should you consider active indexes (slide 4)
  • How should active indexes be incorporated into a portfolio (slide 5)
  • Compare the performance of a portfolio with and without active indexes (slide 6)
  • Compare the all-in costs of a portfolio that uses active indexes with traditional and robo-advised portfolios (slide 7)
  • AlphaClone Active Index Scorecard (slide 11)

AC Active Indexes Performance – Mar 2017