Market Neutral Strategy Seeking Attractive Returns with Low Volatility

The BCM Decathlon Javelin Market Neutral SMA strategy aims to provide low volatility and consistent, attractive, low-risk total returns that investors desire but are difficult to find in the current market environment.

In today’s hyperconnected world, market participants can react so rapidly to good and bad news. While this connectivity has many benefits, it also presents many challenges. Human investors are unable to keep track of shifting patterns or act quickly enough to take advantage, and the speed at which information is disseminated increases the potential of large market swings and increased volatility. This machine learning based market neutral strategy seeks to remove emotion from the investment decision making process. It aims to limit exposure to extreme market movements, seeking to provide stable returns in a way that is uncorrelated with other investment strategies.

The strategy uses a quantitative approach built on ten years of progressively more sophisticated machine learning technology. This is the same technology* that powers the BCM Decathlon SMA strategies that manage $2 billion in AUM & AUA (as of 12/31/23).

Quantitative, Machine Learning-based Approach

The global events that drive markets are constantly changing but we believe investor behavior, specifically human reactions to varied market events, remains consistent. While the human beings that move markets most often do not act rationally, we believe there are distinct, repeatable patterns in their behavior that can be used as an investment advantage.

The strategy uses machine learning to identify these repeating behavioral patterns in order to predict and rank the relative returns and risk (volatility) of the ETFs in a managed investment universe over the short- and medium-term.

The portfolio management team uses the rankings output to buy offsetting long and short positions based on the “best” and “worst” ranked ETFs as determined by the system.

BCM Decathlon Javelin Market Neutral

Objectives:

Provide consistent returns that are uncorrelated with changes in the stock market, interest rates, other asset price changes or other investment strategies.

Fit within a client account:

Use as a portfolio diversifier or a core holding to seek to enhance risk-adjusted returns, reduce overall portfolio volatility and reduce exposure to extreme market movement.

Setting expectations:

The strategy will target a 4-7% total return (net of fees) with a low 3-5% annualized standard deviation and will typically maintain a net exposure of 0% (with a range of -10% to 10%).

Market Insights