DoubleLine: “Smart Beta, Meet Smart Alpha” [SLIDES]

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DoubleLine: “Smart Beta, Meet Smart Alpha” [SLIDES]

DoubleLine Shiller Enhanced CAPE Strategy

What is Double Value?

  • The DoubleLine Shiller Enhanced CAPE Strategy creates “Double Value” for investors when combining two unique sources of value:
    • The Shiller Barclays CAPE® U.S. Sector Index attempts to shift portfolio exposures to the “cheapest” sectors of the large cap equity markets
    • DoubleLine’s Fixed Income strategy strives to shift its exposures to the “cheapest” sectors of the fixed income markets.
  • Both strategies attempt to offer a value play in their respective markets, and when combined investors have the potential to receive “Double Value.”

DoubleLine Shiller CAPE Structure

  • The distinct structure of the DoubleLine Shiller Enhanced CAPE® Strategy allows investors to simultaneously access returns of the equity markets and fixed income markets. By using an equity index swap, $1 invested in the strategy provides approximately $1 of exposure to each market.

What is the CAPE Ratio?

  • Acclaimed value investors Benjamin Graham and David Dodd noted in Security Analysis that equity valuations tend to follow a business cycle of 3-7 years
  • The CAPE® Ratio was formulated in the seminal 1988 piece1 from Professor Robert Shiller and John Campbell.
  • CAPE® = Cyclically Adjusted P/E (Price?to?Earnings)

DoubleLine

  • The CAPE® ratio seeks to assess longer term equity valuation by using an inflation adjusted earnings horizon that is 10 times longer than the traditional P/E measure
  • Similar to the traditional P/E the CAPE® can be applied to a single equity, a portfolio of equities, a sector or a broad based index

CAPE Ratio for Value Investing – Sectors

  • By applying the CAPE® ratio, equity sectors showing a lower CAPE® ratio have tended to have higher subsequent returns

DoubleLine

Jim Chanos Unveils Lastest Short As Fund Manager Bets On Further Market Declines

Data 1639507577Jim Chanos has a new short target in his sights. Earlier this week, the hedge fund manager disclosed that he is betting against "legacy" data centers that face growing competition from the trio of technology giants, which have previously been their biggest customers. The fund manager, who is best known for his winning bet against Read More

Relative CAPE Indicator

  • To account for idiosyncratic differences between sectors where CAPE® ratios have historically been of different magnitudes one can construct a Relative CAPE® ratio
  • This may allow investors to compare sector valuations on a level playing field

DoubleLine

DoubleLine: "Smart Beta, Meet Smart Alpha"

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