macroeconomics-based asset allocation · 2019-08-24 · profile of asset allocation models....

All information contained herein is for informational purposes only. Please refer to the important disclosure information at the end of this presentation for definitions, additional information, and risksAll information contained herein is for informational purposes only. Please refer to the important disclosure information at the end of this presentation for definitions, additional information, and risks

FUNDAMENTALLY DRIVEN.MACROECONOMICS-BASED ASSET ALLOCATION

All Product Pitchbook Q1 2018

All information contained herein is for informational purposes only. Please refer to the important disclosure information at the end of this presentation for definitions, additional information, and risks

• Equity prices tend to appreciate over longer periods.

• Fundamental macroeconomic trends have an impact on medium term market movements.

• Equity markets typically experience drawdowns during periods later identified as recessions.

Firm Overview:General Investment Principles

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ASSETS UNDER MANAGEMENT

$2.14 BILLION3/31/18

FIRM LOCATIONS

CHICAGO, ILNEW YORK, NY


Astor Portfolio Management Team

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ROB STEINCEO, Founder

•Federal Reserve: Project Analyst under chairmanship of Paul Volcker

•Senior trading or portfolio management positions with Bank of American New York/Chicago, Harris Bank Chicago

•Managing Director of Proprietary Trading for Barclay’s Bank PLC New York

•B.S. University of Michigan, Ann Arbor

•Author: Inside Greenspan’s Briefcase (McGraw Hill) and The Bull Inside the Bear (John Wiley and Sons)

JOHN ECKSTEINCIO

•Vice Chairman of the Investment Committee

•Founder, Cornerstone Quantitative Investment Group, global macro hedge fund with peak assets of $600 million.

•Researcher, Luck Trading Company, a commodity trading adviser

•B.S. from Brown University. Masters in Public Administration (International Economic Policy) from Columbia University

•Co-Author: Commodity Investing (John Wiley & Sons)

BRYAN NOVAKSenior Managing Director

•Joined Astor in 2002

•Worked on Astor’s Mutual Fund launch

•Former equity options trader for Second City Trading, LLC at the CBOE in Chicago

•CAIA charterholder

•B.S. From Ohio State University


• Astor’s macroeconomic-driven approach to dynamic ETF portfolio construction has given Astor the ability to manage risk for clients for over a decade.

Firm Overview: Approach

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MACROECONOMICANALYSIS

Fundamental analysis of the economy guides investment decision making

processes.

DYNAMIC ASSETALLOCATION

Portfolio construction utilizes a broad range of asset classes in an attempt

to create more favorable risk-adjusted returns (i.e. higher average

returns with reduced volatility).

EFFICIENT INVESTMENTVEHICLES

Exclusive use of exchange-traded funds in portfolios provides access to multiple asset classes in a liquid, on-

exchange format.

There is no guarantee that investment objectives will be met. There is no assurance that Astor’s investment programs will produce profitable returns or that any account with have similar results. You may lose money.


• With macro, top down analysis as the cornerstone of the Astor investment philosophy, we have created strategies to cater to varying risk tolerances as well as portfolio objectives. Each strategy objective is designed as a compliment to traditional investment allocations, allowing investors to diversify their portfolios while managing key macro risk factors to help mitigate volatility and lessen portfolio drawdowns associated with adverse macro environments. • Whatever your portfolio objective, Astor has a strategy created to compliment your

investment objective and help investors stay disciplined to reach their investment goals.

ASTOR STRATEGIES

Astor Solution Series

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DYNAMIC ALLOCATION

(All Asset - Broad Equity)

SECTOR ALLOCATION

(U.S. Equity)

ACTIVE INCOME

(Unconstrained Income)

GLOBAL MACRO

(Alternative/Hedge)

Investment Philosophy: Astor believes that diligent analysis of economic data can provide valuable signals for longer-term financial market allocations. Our researchis based on economic theory vetted by rigorous analysis and research. History has shown periods of severe economic stress (i.e. recessions) often coincide withsubstantial drawdowns in the stock market while periods of economic growth has coincided with rising equity prices. Astor's analysis seeks to identify signs ofweakness as they start to appear. Astor uses the information to attempt to reduce client participation in these drawdowns by reducing exposure to risky assets.When our analysis indicates the U.S. Economy’s health is above ‘average growth’, the Astor Investment Committee seeks to increase overall exposure to risky assets(stocks, other) in an attempt to capture positive returns from appreciating equity prices.


•We use broad fundamental indicators, such as output and employment, as tools to gauge the current phase of the economic cycle.• Economic data of various frequency is gathered using a proprietary method that

allows us to generate a singular economic indicator: The Astor Economic Index®

Macroeconomic Analysis:Astor’s Goal Is To Interpret The Current Economic Cycle

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The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. There is no guarantee the index will produce the same results in the future. An investment cannot be made in an index


1 • Semiconductor Buildings• Challenger Report• Construction Spending• Manufacturing ISM Index• ICSC- Goldman Sachs Chain Store Sales• Personal Income

2 • Vehicle Sales – Auto Data• MBA Mortgage Applications Survey• Conference Board Measure of CEO

Confidence

3 • Chain Store Sales• Monster Employment Index• Jobless Claims• Productivity and Costs• Factory Orders• Non-Mfg. ISM Index• Oil and Gas Inventories• Weekly Natural Gas Storage Report

4 • Non-Farm Payroll• ECRI Weekly Leading Index

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• Consumer Credit• Conference Board• Employment Trends Index

8 • Chain Store Sales ICSC Goldman Sachs 9 • MBA Mortgage Application Survey• Job Openings and Labor Turnover Survey• Wholesale Trade (MWTR)• Oil and Gas Inventories

10 • Jobless Claims• Import and Export Prices• Weekly Natural Gas Storage• Treasury Budget

11 • ECRI Weekly Leading Index

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• Retail Sales (MARTIS)• International Trade

15 • ICSC Goldman Sacks Chain Store Sales Snapshot

• Consumer Price Index• Business Inventories (MTIS)• NY Empire State Manufacturing Survey• NAHB Wells Fargo Housing Market Index• Manufacturing & Trade Inventories & Sales

16 • MBA Mortgage Applications Survey• Industrial Production• Oil & Gas Inventories• Beige Book

17 • Jobless Claims• The Conference Board Leading Indicators• Weekly Natural Gas Storage Report• Philadelphia Fed Survey• SEMI Book-to-Bill Ratio• New Residential Construction

18 • Current Account• ECRI Weekly Leading Index• Producer Price Index

21 22 • ICSC Goldman Sacks Chain Store Sales 23 • MBA Mortgage Applications Survey• Monthly Mass Layoffs• Oil and Gas Inventories

24 • Jobless Claims• Durable Goods• The Conference Board Help Wanted• New Home Sales• Weekly Natural Gas Storage Report• Kansas City Fed Manufacturing Survey

25 • GDP• Existing Home Sales• ECRI Weekly Leading Index

28 • Personal Income• Wells Fargo/ Gallup Investor Optimism and

Retirement• Richmond Fed Manufacturing Index

29 • ICSC Goldman Sacks Chain Store Sales• The Conference Board Consumer

Confidence• Agricultural Prices

30 • MBA Mortgage Applications Survey• Chicago Fed National Activity Index• Chicago PMI• Oil and Gas Inventories• Thomson Reuters/University of Michigan• Survey of Consumers• Personal Spending

Economic Indicators that are BOLD have a significant impact on Astor’s Economic Models.

Source: Stein, Rob. Finding the Bull Inside the Bear, Market Place Books, 2015: Pages 77-79.

Economic Calendar:Illustration of various economic data points, reports, surveys, etc. that are released over a calendar month

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• The cornerstone of Astor’s investment philosophy is our proprietary, data-driven economic index which allows us to gain a comprehensive view of the relative strength or weakness of the U.S. economy.

The Astor Economic Index® (AEI)A Real Time Snapshot Of The U.S. Economy

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Source: Astor calculations.The AEI should not be used as the sole determining factor for your investment decision. There is no guarantee that the index will produce the same results in the future. An investment cannot be made in the index

“The Astor Economic Index® is a measurement of the strength of the economy. Risk assets, like stocks, tend to appreciate over time and demonstrate a greater probability to appreciate during times of average or greater economic strength. Conversely, when the economic strength of the economy is below average risk assets like equities tend to underperform. At Astor, we measure the economy and increase or decrease risk holdings based on the proprietary measurement of the economy.”- Rob Stein, CEO and Founder

Recessionary Periods in U.S. EconomyAstor Economic Index ®

Astor Economic Index®As of 3/31/18

StrongGrowth

AverageGrowth

Recession

§ AEI focusses on key macroeconomic data points to determine the overall health of U.S. Economy.

§ Each input of economic data is statistically measured and assigned a value.

§ Aggregate of the values across all economic data points equals the total AEI Score.


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S&P 500

• The AEI is designed to suggest an approximate level of risk exposure.

• The higher the AEI score, the more favorable view the index has on taking risk.

• The lower the AEI score, the more risk averse the index becomes.

Astor Economic Index®Throughout Cycles In U.S. Equity Markets

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Source: Astor calculations.The AEI should not be used as the sole determining factor for your investment decision. There is no guarantee that the index will produce the same results in the future. An investment cannot be made in the index

Recessionary Periods in U.S. EconomyAstor Economic Index ®

Astor Economic Index®As of 3/31/18

StrongGrowth

AverageGrowth

Recession


• Investors grappling with lower interest rates have to take bigger risks if investors want the opportunity to obtain the returns realized two decades ago.

• Current financial market conditions have changed the risk and return profile of asset allocation models.

• Investors are faced with having to take substantially more risk.

• Dynamic allocation strategies can adapt investors’ portfolios to current conditions.

Why Dynamic Allocation: The Search For Return

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1995 2005 2015

Private Equity

U.S. Large Cap

U.S. Small Cap

Non-U.S. Equity

Real Estate

Bonds

Estimates of what investors needed to earn 7.5%

Data Source: Callan AssociatesIllustration: Astor Investment ManagementThe illustration does not depict the allocation or returns Astor investment strategies seek to achieve.

7.5% 7.5% 7.5%6.0% 8.9% 17.2%

Expected Return

Standard Deviation


• Objective: • The Strategy seeks to adjust a portfolio allocation of

multiple asset classes throughout economic cycles by utilizing macroeconomic analysis to determine portfolio risk targets. The Astor Economic Index® is the primary driver in determining strategy allocations between stocks, bonds, cash and other major asset classes.

Astor Dynamic Allocation Strategy

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Portfolio Positioning (Hypothetical 1):

Equity – Balanced/Moderate: The Astor Dynamic Allocation Strategy can be used as the active portion of an equity allocation.

These are examples of hypothetical allocations. Talk to a financial professional to determine product suitability. Hypothetical allocations are not reflective of strategy performance

Portfolio Positioning (Hypothetical 2):

Risk Management: The Astor Dynamic Allocation Strategy can be used as a way to manage risk in an overall allocation. The strategy has the ability to have low correlation to both stocks and bonds. The strategy also has the ability to take inverse positions during times of extreme economic uncertainty.

ADA(Equity)

20%

Equity45%

Fixed Income35%

ADA (Equity)15%

Equity55%

Fixed Income30%

Risk Management

Equity

Fixed

Inco

me

Balanced/Moderate

EquityEq

uity

Fixed

Inco

me

Hypothetical Allocation of Astor Dynamic Allocation Strategy in a 60/40 portfolio

Strategy Highlights:

§ Macro Trends are relevant and valuable input to making risk exposure adjustment.

§ “Risk Dial” concept, using Astor Economic Index®, determines when to increase and decrease market exposure.

§ Ability to reduce market correlation and beta to 0 during periods of dramatic economic weakness and recessions that typically correspond to substantial portfolio losses.


• The Astor Economic Index® is calculated on a monthly basis.• The AEI Score translates to a Beta Target

(relative to S&P 500) for the Astor Dynamic Allocation Strategy.• Generally speaking, the healthier the U.S.

Economy, the higher the Beta Target• Inverse Equity: During periods of extreme

economic duress, the Beta Target can reach a point that indicates taking inverse equity exposure up to 20% (net).

Portfolio Construction: Calculating The Astor Economic Index® & Establishing Beta Target For Strategy

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The Astor Economic Index® should not be used as the soledetermining factor for your investment decisions. There is noguarantee the index will produce the same results in the future. Aninvestment cannot be made in the index

Inverse Positions: An investment in an exchange-traded fund whichseeks to replicate 100% of the daily inverse performance of anunderlying index or security. Inverse ETFs have potential forsignificant loss and may not be suitable for all investors.

Example: Historical AEI score and Beta Targets for Dynamic Asset Allocation Strategy:

Current Strategy Beta Target:

0.91(as of 3/31/18)

Date Strategy Beta: Target

12/31/2005 0.739/30/2007 0.489/30/2008 -0.159/30/2009 0.369/30/2013 0.77

12/31/2015 0.6812/31/2016 0.75

3/31/18 0.91

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X Beta Target to S&P 500 TR (Right Axis)Astor Economic Index ™ (Left Axis)

Strong Growth

Average Growth

Beta of 0 to S&P 500

Beta of 1 to S&P 500

Recession

Astor Economic Index

TM

Beta of Astor Dynamic Allocation to S&

P 500 TR

Astor Economic Index® Charted against Astor Dynamic Balanced Beta to S&P 500 TR (as of 3/31/18)


Portfolio Construction: Achieving Beta Target

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Current Beta Target:

0.91(as of 3/31/18)

All information presented is calculated based on the asset allocations of each calendar quarter ending date only and do not account for the asset allocations during the quarter.Asset allocations are no indication of portfolio performance See accompanying disclosures for asset class definitions For the historical allocation presented, from the third quarter2010 going forward, the composite allocation is shown. Prior to this period, holdings from representative accounts that were invested in the model were used to calculate theallocations shown.

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Historical Exposure and Risk Profile: Astor Dynamic Allocation as of 3/31/18

Equity Other Fixed Income/Cash Inverse Equity


• Correlation to the S&P 500 has historically dropped into negative values during recessionary periods.

• The beta of the strategy fluctuates based on the overall health of the U.S. Economy –as suggested by the AEI.

Historical Correlation & Beta:Astor Dynamic Allocation Strategy

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Source: MorningstarDirect, Astor, Bloomberg. The performance data shown is 2005 through 3/31/18 and represents past performance for the composites(s) defined on the following page. Current performance may be lower or higher. Net of fee performance assumes the reinvestment of dividends. Gross of fee returns are shown as supplemental information only and represent “pure gross” returns. Pure gross returns are calculated before the deduction of all fees. Please refer to the accompanying disclosures for additional information concerning these results.

Full Performance and Risk Statistics on the following two slides

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Rolling 12-Month Beta and Correlation to S&P 500

Correlation Beta


Performance: Astor Dynamic Allocation Strategy(Formerly “LSB” - Long/Short Balanced)

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Growth of $100K InvestmentSource: MorningstarDirect. The chart is calculated on a monthly basis using net-of –fees composite returns with an inception value of $100,000 and assumes the reinvestment of dividends. Past performance is not an indication of future results. Please refer to the accompanying disclosures for additional information concerning these result

Source: Bloomberg, Astor. The performance data shown is through 3/31/18 and represents past performance for the composites(s) defined on the following page. Current performance may be lower or higher than the performance data quoted above. Past Performance is no guarantee of future results. Net of fee performance assumes the reinvestment of dividends. Gross of fee returns are shown as supplemental information only and represent “pure gross” returns. Pure gross returns are calculated before the deduction of all fees. Please refer to the accompanying disclosures for additional information concerning these results.

Performance 1/1/2005 - 3/31/18

Calendar Year Returns 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Astor Dynamic Allocation (Gross) 7.05% 6.20% 10.28% -2.25% 18.07% 11.27% -4.66% 2.50% 14.06% 9.47% -1.34% 8.24% 17.37%Astor Dynamic Allocation (Net) 4.85% 4.39% 8.33% -3.91% 15.90% 9.23% -6.59% 0.48% 11.81% 7.29% -3.32% 6.12% 15.06%

HFRI Total Macro Index 6.79% 8.15% 11.11% 4.83% 4.34% 8.06% -4.16% -0.06% -0.44% 5.58% -1.26% 1.04% 2.27%

S&P 500 TR Index 4.91% 15.79% 5.49% -37.00% 26.46% 15.06% 2.11% 16.00% 32.39% 13.69% 1.38% 11.96% 21.83%

Annualized Q1-18 YTD(as of 3/31/18)

1-YR 3-YR 5-YR 7-YR 10-YRSince

InceptionStandard Deviation

SortinoRatio

Max Drawdown

Astor Dynamic Allocation (Gross) -0.01% -0.01% 12.35% 7.13% 8.29% 5.82% 7.40% 7.04% 7.69 1.29 -11.44%

Astor Dynamic Allocation (Net) -0.52% -0.52% 10.13% 5.01% 6.14% 3.72% 5.32% 5.00% 7.73% 0.81 -13.23%

HFRI Total Macro Index -0.97% -0.97% 1.32% -0.75% 0.95% 0.32% 1.45% 3.33% 4.69% 0.76 -8.02%

S&P 500 TR Index -0.76% -0.76% 13.99% 10.78% 13.31% 12.70% 9.50% 8.30% 13.74 0.81 -50.95%


Max Drawdown & Risk Metrics:Astor Dynamic Allocation Strategy

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S&P 500 TRAstor Dynamic Allocation

(Net)

Maximum Drawdown -50.95% -13.23%

Months to Recover 36 18

Required Return to Breakeven 103.87% 15.25%

Data: Bloomberg

Illustration: Astor

Source: Zephyr StyleADVISOR, Astor. The performance data shown is 2005 through 3/31/18

and represents past performance for the composites(s) defined on the following

page. Current performance may be lower or higher. Net of fee performance assumes the

reinvestment of dividends. Gross of fee returns are shown as supplemental information only

and represent “pure gross” returns. Pure gross returns are calculated before the deduction

of all fees. Please refer to the accompanying disclosures for additional information

concerning these results.

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Benefits of Minimizing DrawdownAs of 3/31/18

Dynamic Allocation (LSB) GrossDynamic Allocation (LSB ) NetS&P 500 Total Return


Objective: • The Strategy seeks to overweight and underweight sectors within

the U.S. Equity market based on Astor’s view of the economic health of each individual sector. A version of the Astor Economic Index® is the primary driver in determining sector weightings.

Astor Solutions:The Astor Sector Allocation Strategy (formerly S.T.A.R.)

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Strategy Highlights

• Attempts to take advantage of the cyclical capture of markets and seeks to outperform traditional equity investments through three value adds:

1. Sector Rotation2. ETF Selection3. Risk Control – Between 0% and 85% Cash

• Leverages the philosophy of the Astor Economic Index® in a proprietary sector rotation model.

• The Sector model seeks to underweight and overweight individual sectors based on growth differentials between the various sectors.

• Risk Control Overlay seeks to progressively reduce equity exposure as economic trends decline in individual sectors and the broad based economy.

Portfolio Positioning:

Core U.S. Equity Holding: The Astor Sector Allocation strategy is designed to be a core U.S. Equity holding in a client’s portfolio. 25% (15% of a 60% Equity Allocation) of total equity exposure is a reasonable starting point when thinking about portfolio positioning of Astor Sector Allocation Strategy.

Astor Sector

Allocatio…

Equity…

Fixed Income

40%

Active U.S. Equity

Equity

Fixe

d In

com

e

The Astor Economic Index® is a proprietary index created byAstor Investment Management. The Index should not be usedas the sole determining factor for your investment decisions.There is no guarantee the index will produce the same resultsin the future. An investment cannot be made in the index

Hypothetical Allocation of Astor Sector Allocation Strategy in a 60/40 portfolio


Historical Strategy Allocation: • Year By Year Calendar Year Returns for Dow Jones Sectors• Over the course of economic and market cycles, the divergence in sector returns can be substantial.

Last year’s largest winner can become this year’s largest loser.• By rotating among sectors based on momentum and fundamentals, the portfolio attempts to skip the

underperforming periods.

Astor Sector Allocation

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Real Estate Energy Healthcare Technology Basic Materials Utilities Financials Industrials Utilities Consumer Goods Energy35.50% 34.84% -24.28% 64.48% 29.45% 19.15% 23.94% 40.61% 28.09% 6.05% 26.26%

Energy Basic Materials Consumer Goods Basic Materials Real Estate Healthcare Consumer Services Consumer Services Real Estate Consumer Services Industrials22.77% 30.35% -25.69% 61.88% 26.93% 9.44% 22.29% 40.24% 27.24% 5.20% 19.53%

Utilities Utilities Utilities Consumer Services Industrials Consumer Goods Real Estate Healthcare Healthcare Healthcare Basic Materials21.28% 17.76% -30.25% 31.63% 26.02% 8.79% 18.93% 39.45% 23.87% 5.03% 17.61%

Financials Technology Consumer Services Real Estate Consumer Services Real Estate Industrials Financials Technology Technology Utilities16.27% 15.70% -31.80% 30.81% 22.00% 6.05% 17.87% 31.52% 20.04% 4.10% 17.06%

Consumer Goods Industrials Energy Industrials Energy Consumer Services Healthcare Consumer Goods Consumer Services Real Estate Financials14.92% 13.57% -35.77% 26.07% 19.70% 5.50% 16.75% 30.55% 13.05% 2.14% 14.56%

Basic Materials Consumer Goods Industrials Consumer Goods Consumer Goods Energy Consumer Goods Technology Financials Industrials Technology14.79% 9.68% -39.55% 23.86% 19.50% 4.11% 12.80% 26.97% 12.27% -1.69% 14.22%

Industrials Healthcare Real Estate Healthcare Technology Technology Technology Energy Consumer Goods Financials Real Estate13.87% 6.77% -40.07% 19.27% 12.58% 0.16% 12.08% 26.14% 12.11% -2.05% 7.56%

Consumer Services Consumer Services Technology Energy Financials Industrials Basic Materials Basic Materials Industrials Utilities Consumer Goods13.29% -8.15% -42.87% 17.26% 10.94% -0.79% 7.83% 17.66% 7.30% -4.61% 5.28%

Technology Real Estate Basic Materials Financials Utilities Financials Energy Utilities Basic Materials Basic Materials Consumer Services10.10% -18.15% -51.96% 14.25% 7.80% -14.62% 4.71% 15.20% 1.29% -14.38% 4.46%

Healthcare Financials Financials Utilities Healthcare Basic Materials Utilities Real Estate Energy Energy Healthcare5.35% -20.03% -52.23% 12.58% 2.52% -16.41% 1.76% 1.77% -9.27% -22.03% -4.01%

Source: BloombergIllustration: Astor

Sectors: Dow Jones US Sector (Energy, Financial, Health Care, Consumer Services, Consumer Goods, Technology, Utilities, Real Estate, Industrials)


Historical Strategy Allocation: Astor Sector Allocation Strategy• Overweighting/Underweighting

relative to market cap weightings of U.S. Sectors based on the economic health of each sector:


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For all charts, blue line indicates Astor’s weighting relative to the market cap weighting.

For all charts, orange line indicates the market cap weighting for the particular sector at a period in time.

When the blue line is above the orange line, the Astor Sector Allocation strategy had an overweight in that particular sector relative to the market cap weighting. When the blue line is below the orange line, the Astor Sector Allocation strategy had an underweight in that particular sector.

Energy

Energy Market CapFeb-97

Feb-99

Feb-01

Feb-03

Feb-05

Feb-07

Feb-09

Feb-11

Feb-13

Basic Materials

Basic Materials

Market Cap

F… F… F… F… F… F… F… F… F…

Industrials

Industrials

F… F… F… F… F… F… F… F… F…

Consumer Services

Market Cap

F… F… F… F… F… F… F… F… F…

Consumer Goods

Market Cap

Health Care

Market Cap

F… F… F… F… F… F… F… F… F…

FinancialsF… F… F… F… F… F… F… F… F…

Technology

F… F… F… F… F… F… F… F… F…

Utilities

Energy Basic Materials Industrials

Consumer ServicesConsumer Goods Health Care

Financials Technology Utilities

Source: Astor


Portfolio Constraints: • U.S. Equity – Sector Specific: The Strategy will have between 0% - 70% allocated to specific U.S.

Equity Sectors.

• Throughout economic cycles, sector weights are reduced/increased based on macroeconomic data points for each sector. Growth differentials and overall economic health in the various sectors will result in underweight/overweight allocations for each sector.

• U.S. Equity – Broad Equity Style Specific: The Strategy will have between 15% - 30% allocated to broad U.S. Equity asset classes (Large, Mid, Small).

• The Astor Economic Index ® will determine the overall allocation to style specific equity. The Astor Investment Committee will determine the allocation to Large, Mid and/or Small Cap.

• Maximum Risk-Off (Cash and/or Fixed Income): The Strategy will have between 0% - 85% allocated to safe assets, such as Cash and/or Fixed Income

• The Astor Economic Index ®, as well as the economic health of each individual sector, will determine the overall allocation to U.S. Equities. When the overall health of the economy/sectors is weak, the strategy will have higher allocations to Cash/Fixed Income.


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0%

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40%

60%

80%

100%

Risk Type: U.S. Equity – Sector Specific

70%

0%

0%

20%

40%

60%

80%

100%

Risk Type: U.S. Equity – Broad Market

15%

30%

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20%

40%

60%

80%

100%

Risk Type: Safety / Risk Off – Cash and/or Fixed Income

0% 85%

0%

15%

Sector Equity

Style Equity

Cash and Fixed Income

Health of U.S. Economy

ExpansionRecession

70%

30%

Sector Equity

Style Equity

Cash and Fixed Income

85%

15%


• Determining Sector Weightings: Applying Astor’s Economic Approach• Each sector is evaluated individually based on its Sector Economic Index, a sector-

based reading of each sector analyzing:


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Snapshot - Calendar Year End Sector Economic Health

Sector Economic Health StrongerWeaker

Source: BLS, BEA, Bloomberg, Astor Calculations

Sector Output, Sector Employment and Sector Momentum

• When all sectors are at a strong reading, sectors weights will be similar to that of market cap.

• Sector over/underweights are determined by comparing the readings of each sector as well as comparing to other sectors.

• When a given Sector Economic Index is “below average” or “recessionary”, individual sector positions are cut in a gradual manner.

• When a given Sector Economic Index is “above average” to “strong growth,” that sector can take from a “weaker” sector and increase, or overweight relative to that sectors market cap.

• If weak sectors exist and no over-weight sector signals are present, then the portfolio will start raising cash levels.



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The allocations presented are as of the date indicated and are subject to change. Thepercentage of total assets and asset allocations presented here are those of the SectorAllocation Composite for the period indicated. Any individual investor’s portfolio may beallocated differently than presented here due to many factors, including but not limited to,timing of entry into the investment program, discretionary decisions by the clients andreferring advisors, and custodial limitations or the manner in which trades are executed.Asset class percentages are rounded. As such, actual position weights may vary and/or thesum total may not equal 100%.

Sector Signals



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Source: Morningstar Direct. The chart is calculated on a monthly basis using net-of –fees composite returns with an inception value of $100,000 and assumes the reinvestment of dividends. Past performance is not an indication of future results. Please refer to the accompanying disclosures for additional information concerning these result

Source: Bloomberg, Astor, Morningstar Direct. The performance data shown is through 3/31/18 and represents past performance for the composites(s) defined on the following page. Current performance may be lower or higher. Net of fee performance assumes the reinvestment of dividends. Gross of fee returns are shown as supplemental information only and represent “pure gross” returns. Pure gross returns are calculated before the deduction of all fees. Please refer to the accompanying disclosures for additional information concerning these results

GROWTH OF $100,000 INVESTMENT

Performance as of 3/31/18

ANNUAL Q-1 2018 YTD 1-YR 3-YR 5-YR 7-YR 10-YRSINCE

INCEPTION

Sector Allocation (pure gross) -0.15 -0.15 12.86 5.55 9.49 8.36 8.04 7.41

Section Allocation (net) -0.66 -0.66 10.64 3.45 7.33 6.21 5.98 5.49

S&P 500 Index -0.76 -0.76 13.99 10.78 13.31 12.70 9.50 8.30

ANNUAL 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sector Allocation (pure gross) 5.49 9.89 8.24 -22.34 25.20 15.73 -4.31 9.25 31.15 9.69 -4.21 7.97 17.53

Section Allocation (net) 3.83 8.43 6.74 -23.50 22.89 13.72 -6.25 7.12 28.61 7.51 -6.14 5.86 15.22

S&P 500 Index 4.91 15.79 5.49 -37.00 26.46 15.06 2.11 16.00 32.39 13.69 1.38 11.96 21.83


Objective• The Strategy seeks to achieve the highest level of

risk-adjusted yield while taking measured risk given current market conditions.

Astor Active Income

23

Strategy Highlights• Designed as a portfolio to complement traditional income strategies.

• Seeks to establish the asset mix that provides a more attractive yield-to-risk ratio compared to that of intermediate Treasury bonds.

• Aims to add value through diversification and exposure adjustments to credit and duration to reduce the impact of adverse market conditions.

• Attempts to generate returns during any environment; may invest in equity and other non-fixed income asset classes to complement the portfolio’s overall fixed income view.

Portfolio Positioning (Hypothetical 1):Core Fixed Income Holding: The Astor Active Income Strategy is designed to provide investors with income throughout varying economic and interest rate environments.

These are examples of hypothetical allocations. Talk to a financial professional to determine product suitability. Hypothetical allocations are not reflective of strategy performance

Portfolio Positioning (Hypothetical 2):Satellite Fixed Income: Allocate 1/3 to Astor Active Income, 1/3 to Treasuries and 1/3 to ‘other’ fixed income investments.

Hypothetical Allocation of Astor Active Income Strategy in a 60/40 portfolio

Astor Solutions: The Astor Active Income Strategy

Astor Active Income

30%

Equity60%

Fixed Income

10%

Astor Active Income

14%

Fixed Income

13%

Other Fixed Income

13%Equity60%


Income Sourcing And Managing Risk: • The end of the bull market in bonds has amplified the need for skill in finding income without subjecting

investors to undesired risk.

• Historically low interest rates have left investors with low levels of yield but high levels of duration risk – the risk that rates move higher.

• Utilizing complimentary income strategies that can find reasonable levels of income while mitigating macro level risks can add substantial diversification to a portfolio.

Astor Active Income

24

Chart and data not an indication of Strategy PerformanceData: BloombergIllustration: Astor

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Bloomberg Barclays Aggregate Bond Index

Yield-to-worst (left) Modified Duration (right)


Managing Risk: Key Components that Drive Portfolio Adjustments

Astor Active Income

25

• FOMC Policy – Direction of short term rates

• Treasury Yields – Direction of rates on the yield curve

Interest Rates

• Credit Spreads – Direction of investment grade and high yield spreadsCredit

• Overall Health of U.S. Economy – The Astor Economic Index® indicates if the U.S. Economy is Strong, Average or Weak

Macro Economic

Key Component Description Portfolio Implementation

When interest rates are seen as moving higher, the strategy will reduce portfolio duration (less interest rate sensitivity).

When credit spreads tighten (good for credit), the portfolio will take on more credit risk – and vice versa.

In a stable to improving economic environment, the strategy will increase exposure to dividend-paying equities


Portfolio Construction: Building the Strategy• Investing in income streams across the capital structure can add significant value to a portfolio

through changing the risk profile of the portfolio and sensitivity to any one specific risk event.• Based on issuer and security type, each will contain specific risk and return profiles and

respond differently to external variables.

Astor Active Income

26

Updated through 3/31/18. Historical Allocations are not indicative of strategy performance.

0%

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2011 2012 2013 2014 2015 2016 2017 2018

Historical Allocation by Category

Cash High Yield Treasury

Invest Grad Muni Senior Loan

Other Equity International

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Historical Exposure by Duration

Short Intermediate Long Equity


IG Bond HY Bond Aggregate Bond

Preferred Equity

Dividend Equity

US Treasury

Intl Treasury

1-3 Month Bill Loans

IG Bond 1.00

HY Bond 0.58 1.00Aggregate Bond 0.83 0.27 1.00Preferred Equity 0.50 0.50 0.25 1.00

DJ Div Equity 0.24 0.55 0.10 0.49 1.00

US Treasury 0.52 -0.19 0.79 -0.02 -0.11 1.00

Intl Treasury 0.54 0.35 0.52 0.32 0.30 0.25 1.00

1-3 Month Bill -0.10 -0.11 0.03 -0.11 -0.06 0.01 0.07 1.00

Loans 0.29 0.84 0.00 0.43 0.41 -0.42 0.09 -0.11 1.00

• Value of Multiple Income Generating Asset Classes• Typically, higher yielding securities have a higher risk profile.• Understanding the correlations of various assets can guide portfolio construction to

pursue more favorable risk/return characteristics.• Combining non-correlating assets can be a powerful tool for mitigating risk in an income-

focused portfolio.

Astor Active Income

27

Indexes and positions not indicative of Active Income performance

ASSET CORRELATIONS

Source: Data – Bloomberg / Illustration - Astor

DefinitionsIIGG GGrraaddee Iboxx USD Liquid Investment Grade Index UUSS TTrreeaassuurryy ICE US Treasury 7-10 Year Bond Index

HHYY BBoonndd Iboxx USD Liquid High Yield Index IInnttll TTrreeaassuurryy S&P/Citigroup International Bond Ex-US Index

AAgggg BBoonndd Bloomberg Barclays US Aggregate Bond Index LLoonngg CCrreeddiitt Bloomberg Barclays US Long Credit Index

EEMM BBoonndd JPM Emerging Market Bond BBaannkk LLooaann S&P Leveraged US Select Loan Index

Source: Data - BloombergIllustration - Astor

0.00%

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6.00%

0.00% 2.00% 4.00% 6.00% 8.00%

Cur

rent

Indi

cate

d YI

eld

1 Yr. Annualized Standard Deviation

Finding the right yield for the risk

Dow Jones Dividend (DVY) S&P Leveraged Loan (BKLN)iBoxx High Yield (HYG) Barclays Agg Bond (AGG)iBoxx Investment Grade (LQD) U.S. Treasury 7-10 yr (IEF)JPM Emerging Market Bond (EMB) S&P Citi Intl Treasury (IGOV)


• A Diversified, Income Generating Strategy

• Provides diversified exposure to income generating asset classes throughout interest rate and economic cycles.

• Through dynamic, active management, help clients meet their goal of higher income while mitigating risk of traditional income markets.

Astor Active Income

28

The allocations presented are as of the date indicated and are subject to change. The percentage of total assets and asset allocations presented here are those of the Astor Active Income Composite for the period indicated. Any individual investor’s portfolio may be allocated differently than presented due to many factors, including, but limited to timing of entry into the investment program, discretionary decisions by the clients and referring advisors, and custodial limitations to the manner in which trades are executed. A asset class percentages are rounded. As such, actual position weights may vary and/or the sum may not equal 100%

Active Income Holdings (as of 3/31/18)


Astor Active Income

29

Source: Morningstar Direct. The chart is calculated on a monthly basis using net-of –fees composite returns with an inception value of $100,000 and assumes the reinvestment of dividends. Past performance is not an indication of future results. Please refer to the accompanying disclosures for additional information concerning these result

Source: Bloomberg, Astor, Morningstar Direct. The performance data shown is through 3/31/18 and represents past performance for the composites(s) defined on the following page. Current performance may be lower or higher. Net of fee performance assumes the reinvestment of dividends. Gross of fee returns are shown as supplemental information only and represent “pure gross” returns. Pure gross returns are calculated before the deduction of all fees. Please refer to the accompanying disclosures for additional information concerning these results

Performance (as of 3/31/18)

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Growth of 100K Investment (left axis) with Correlation of Astor Active Income to the Barclay Agg Overlay (right axis)As of 3/31/18

AI Net AI Gross Barclays Agg Bond Correlation (9 month rolling)


All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information. There is no assurance that Astor’s investment programs will produce profitable returns or that any account will have similar results. You may lose money. Past results are no guarantee of future results and no representation is made that a client will or is likely to achieve results that are similar to those shown. Factors impacting client returns include individual client risk tolerance, restrictions a client may place on the account, investment objectives, choice of broker/ dealers or custodians, as well as other factors. Any particular client’s account performance may differ from the program results due to, among other things, commission, timing of order entry, or the manner in which the trades are executed. Clients may not receive certain trades or experience different timing of trades due to items such as client imposed restrictions, money transfers, inception dates, and others. The investment return and principal value of an investment will fluctuate and an investor’s equity, when liquidated, may be worth more or less than the original cost. An investment cannot be made directly into an index.

The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

The performance presented is of the composites described below. Valuations are computed and performance is reported in U.S. dollars. Performance results assume reinvestment of dividends. Gross-of-fee returns are shown as supplemental information only and represent “pure gross” returns. “Pure gross” returns are calculated before the deduction of all fees, including trading, advisory, and administrative fees. A small number of client accounts may pay for trading costs as individual expenses and the gross-of-fees returns for these accounts would be net of trading expenses. Net-of-fee returns are calculated using a model fee charged quarterly. Certain accounts pay fees outside of the composite account and thus, require a model fee for performance calculation. In order to maintain consistency, Astor calculates a model fee across all composite accounts. The model fee is representative of the actual fees charged to client accounts which covers trading, advisory, and other costs. The model fee provides a more conservative estimate of performance. The 2017 annual model fees for the Dynamic Allocation Composite, Sector Allocation Composite, and Active Income Composite are 2.00%, 2.00%, and 1.25%, respectively. Generally, accounts will pay for transaction costs within a bundled fee which may also include items such as advisory, administrative, and custodial fees. In addition to these expenses, Astor primarily purchases securities which contain embedded expenses. These costs result in a layering of fees. Please note performance results include accounts which pay trading costs separately and accounts which pay a bundled fee inclusive of advisory and trading costs. The annual fee paid by clients will typically range from 1.00% – 3.00% of the clients’ assets under management. Astor receives a portion of this total fee as compensation for provided advisory services. Astor’s annual management fee varies based upon custodial arrangements, account size, and other factors. The composite includes accounts which were direct advisory clients of Astor and accounts which receive Astor’s services as part of a wrap fee or sub-advisory program.

Disclosures

30


The Dynamic Allocation Composite (prior to December 1, 2016 was known as the Long/Short Balanced Composite) is a multi-asset, tactical allocation strategy that exclusively uses exchange-traded funds

(ETFs). The Composite will invest in a mix of asset classes, including equity, fixed income, commodities and currencies depending on the economic and market environment. During economic contractions,

the Composite seeks to reduce risk by utilizing defensive positioning such as inverse equity and fixed income. The strategy may employ the use of unleveraged inverse exchange-traded funds, designed to

track a single multiple of the daily inverse performance of a given index. For purposes of defining the composite of accounts, a minimum account size of $50,000 is imposed monthly. The benchmark is the

HFRI Macro (Total) Index. The HFRI Macro (Total) Index is an unmanaged, equal- weighted composite of funds listed in the HFRI Database having either $50 million or greater in assets or a 12- month track

record. HFRI is a registered trademark of Hedge Fund Research, Inc. Prior to 12/31/12, the benchmark was a 60%/40% blend of the S&P 500 Index and the Barclay’s Capital U.S. Aggregate Bond Index,

respectively, rebalanced monthly. The benchmark was changed to help clients better assess how Astor’s performance matches against other managers using similar portfolio management tactics. The

performance of the S &P 500 is presented because it is a widely used benchmark and indicator of market performance. The S&P 500 Index is an unmanaged composite of 500 large capitalization companies.

S&P 500 is a registered trademark of McGraw-Hill, Inc.

The Sector Allocation Composite (prior to December 1, 2016 was known as the STAR Composite) is a tactical strategy focused on the generation of returns through shifts in domestic equity sector allocations.

The Composite exclusively uses exchange-traded funds (ETFs) and focuses on investing in domestic equities during economic expansions while reducing equity exposure for fixed income and cash in weak

economic periods. Prior to May 2014, the Composite previously invested in various other asset classes, including commodities, international equity, and currencies. The Composite includes a minimum 15%

domestic equity allocation and does not invest in inverse funds. For purposes of defining the composite of accounts, a minimum account size of $50,000 is imposed monthly. The benchmark is the S&P 500

Index. The S&P 500 Index is an unmanaged composite of 500 large capitalization companies.

The Active Income Composite is an actively managed strategy designed to produce income and to generate long-term capital appreciation by exclusively investing in exchange-traded funds (“ETFs”). The

Composite invests primarily in fixed income securities and dividend yielding equities. The strategy may employ the use of unleveraged inverse ETFs, designed to track a single multiple of the daily inverse

performance of a given index. For purposes of defining the composite of accounts, a minimum account size of $50,000 is imposed monthly. The benchmark is the Barclays Capital U.S. Aggregate Bond Index.

The Barclays Capital U.S. Aggregate Bond is comprised of approximately 6,000 publicly traded bonds including U.S. Government, mortgage-backed, corporate and Yankee bonds with an average maturity of

approximately 10 years.

Astor’s strategies seek to achieve their objectives by investing in Exchange-Traded Funds (“ETFs”). An ETF is a type of Investment Company which attempts to achieve a return similar to a set benchmark or

index. The value of an ETF is dependent on the value of the underlying assets held. ETFs are subject to investment advisory and other expenses which results in a layering of fees for clients. As a result, your

cost of investing in Astor’s strategies will be higher than the cost of investing directly in ETFs and may be higher than other investments with similar objectives. ETFs may trade for less than their net asset

value. Although ETFs are exchanged traded, a lack of demand can prevent daily pricing and liquidity from being available. Investors should carefully consider the investment objectives, risks, charges, and

expenses of the ETFs held within Astor’s strategies before investing. International markets have risks due to currency valuations and political or economic events. Emerging markets typically have more risk

than developed markets. The prices of small and mid-cap companies tend to be more volatile than those of larger, more established companies. It is important to note that bond prices move inversely with

interest rates and fixed income ETFs can experience negative performance in a period of rising interest rates. High yield bonds are subject to higher risk of principal loss due to an increased chance of default.

Disclosures

31


Asset Classes: An asset class is a group of securities that exhibits similar characteristics, behaves similarly in the marketplace and is subject to the same laws and regulations. The three main asset classes are equities, or stocks; fixed income, or bonds; and cash equivalents, or money market instruments.

Beta: A quantitative measure of the volatility of a given portfolio, relative to the S&P 500 Index, computed using monthly returns. A beta above 1 is more volatile than the index, while a beta below 1 is less volatile.

Cash: An investment in highly liquid assets in the form of legal tender and money market investments or an investment in a mutual fund or exchange-traded fund that invests primarily in these types of investments.

Correlation: a statistic that measures the degree to which two securities move in relation to each other.

Currency: An investment in an exchange-traded fund whose performance is primarily related to the performance of a financial currency or group of currencies.

Downside: The negative movement in the price of a security, sector or market.

Equity: A stock or similar security representing an ownership interest in a company or an exchange-traded fund that invests primarily in such securities.

Fixed Income: A debt investment in which a corporate or government entity borrows funds from an investor for a defined period of time at a fixed interest rate or an exchange-traded fund that invests primarily in such securities.

High Yield: An investment in an exchange-traded fund that invests primarily in the category of debt instruments which have a higher risk of default and thus pay a higher yield. These debt instruments are rated below a certain level by the major credit rating agencies due and are also known as “junk bonds.” (For Moody’s rating scale this generally means bonds rated Ba and lower and for Standard & Poor’s, bonds rated BB and lower.)

International Equity: A stock or similar security representing an ownership interest in a company domiciled outside of the United States or an exchange-traded fund that invests primarily in such securities.

Investment Grade: An investment in an exchange-traded fund that invests primarily in the category of debt instruments which are rated above a certain level by the major credit rating agencies due to their increased likelihood of meeting payment obligations. (For Moody’s rating scale this generally means bonds rated Baa and higher and for Standard & Poor’s, bonds rated BBB and higher.)

Municipal: An investment in an exchange-traded fund that invests primarily in the debt obligations of states, municipalities, and counties. Interest earned on these obligations is exempt from federal tax and in certain cases, also state and local tax.

Inverse Position (Exchange Traded Fund): An inverse exchange-traded fund is an exchange-traded fund (ETF), traded on a public stock market, which is designed to perform as the inverse of whatever index or benchmark it is designed to track ... An inverse S&P 500 ETF, for example, seeks a daily percentage movement opposite that of the S&P.

Maximum Drawdown: The largest percentage retracement within an investment record calculated from a portfolio value.

Rolling (36 month) Calculations: refers to a 36-month period that starts at any point in the calendar and runs for 36 months.

Real Estate: A security such as a mutual fund or exchange-traded fund whose performance is primarily related to the performance of underlying investments in property consisting of land and buildings on it, either directly or through Real Estate Investment Trusts (REITs), or a group thereof.

Sector Equity: An investment in an exchange-traded fund that invests in shares of companies which are classified within a specific sector according to the Global Industry Classification Standard (GICS®).

Style Equity: An investment in an exchange-traded fund that invests in the shares of companies as defined by industry standards for market capitalization categories (e.g. large cap, mid cap, and small cap).The Sector Allocation Composite (prior to December 1, 2016 was known as Sector Tactical Asset Allocation (“S.T.A.R”) Composite)

Standard Deviation: A statistical measure of the historical volatility of a security or portfolio, computed using monthly returns since inception and presented as an annualized figure.

Sortino Ratio: the statistical tool that measures the performance of the investment relative to the downward deviation. Unlike Sharpe, it doesn't take into account the total volatility in the investment.

Sharpe Ratio: The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk (and is a deviation risk measure)

The Chartered Financial Analyst (CFA)designation is an international professional designation offered by the CFA Institute to financial analysts. To become a CFA Charterholder, candidates must pass each of three six-hour exams, possess a bachelor’s degree from an accredited institution (or have equivalent education or work experience) and have 48 months of qualified, professional work experience. Individuals are must also adhere to a strict code of ethics and standards governing their professional conduct.

The Chartered Alternative Investment Analyst(“CAIA”) designation is offered by the Chartered Alternative Investment Analyst Association to individuals working in the field of alternative investments. In order to receive the designation, candidates must pass two four-hour exams, hold a bachelor’s degree or equivalent with at least one year of professional experience (or four years of experience), and abide by the policies of the Association.

Disclosures

32

Please refer to Astor’s Form ADV Part 2 Brochure for additional information regarding fees, risks, and services.

DEFINITIONS

2018-93

macroeconomics-based asset allocation · 2019-08-24 · profile of asset allocation models....

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