ULTRA** (Start Date: 02-2019)

OBJECTIVE: Match the return of the SSO (a 2x S&P 500 ETF) in bullish cycles; move to cash in transition cycles; and, match the return of the SDS (a 2x S&P 500 inverse ETF) in bearish cycles.

Management Approach -  Our goal is to be 100% invested in the SSO (a 2x leveraged ETF) when the Turner Total Market Index is above its "Turner (High-Risk) Band*" and the SSO is above its Turner Band; 100% cash when the SSO and SDS are inside their respective Transition Zones; and, 100% invested in the SDS (a 2x leveraged inverse ETF) when the Turner Total Market Index is below its Turner Band and the SDS is above its Turner Band.  

Portfolio Strategy At-a-Glance
  • Holds the SSO in bull cycles
  • Moves to 100% cash in Transition Zone cycles

  • Holds the SDS in bear cycles

The chart (left) represents a double-blind back-test of the ULTRA model from July 2006 to April 2019.  Bearing in mind that past performance is not indicative of future returns and back-testing is not real trading, the results are, nevertheless, significant.

The model produced returns that beat the SPY (S&P 500 ETF) by 3.8 times.  The mathematical average is almost 40% per year and at that rate, a portfolio would double in size every 1.8 years.

While there is absolutely no guarantee that the future market will be anything like the 13-year historical market of this back-test, the concept of utilizing 2x leveraged ETFs along with the Turner Capital Market Directional methodology appears to produce very attractive returns.

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Turner Capital has developed a set of proprietary analysis algorithms that provide the portfolio manager with the following information:

  • TREND AND CONTINUITY OF TREND - The Turner Capital investment strategy is predicated on the assumption that market and equity trends tend to stay on trend more than they change trend.  Therefore, the methodology relies on the mathematical likelihood that a trend will remain reasonably constant until such time as the trend is detected as having reversed.

  • BULL, TRANSITION OR BEAR CONDITION - The Turner Total Market Index, in general, and equities in particular, are rated by the Turner Capital software system as either in a bullish, transition or bearish trend.  A bullish trend exists when the index or equity is trading above the Turner (High-Risk) Band and trending higher.  A bearish condition exists when the index or equity is trading below the Turner (High-Risk) Band and trending lower. 

  • OVERBOUGHT/OVERSOLD WARNING - The financial objective of Turner Capital's market-directional investing is to keep client capital invested in equities when the risk is lower, relative to normal markets, and to capture profits when risk becomes overly elevated.  Once such example of overly elevated risk is when the market becomes "overbought" or "oversold".  It is at such times that management looks for opportunities to take profits and move some or all of a client's portfolio to cash.  Overbought conditions can occur when the market is trading excessively high above the Turner Band or excessively low below the Turner Band.

  • DOWNSIDE EXIT - According to the Turner Capital analytics, equities held in a client portfolio will typically fluctuate within one standard deviation of normal volatility on a weekly basis.  Once an equity moves higher than one standard deviation of normal volatility above the equity's Turner Band, the equity is typically held in the client's portfolio until such time as it triggers its Stop Loss price, which is generally one standard deviation of normal volatility below the equity's most recent Friday closing price. 

  • Moving Into the Market - When the Turner Total Market Index moves from inside the Turner Band to either a bullish bias or a bearish bias, the manager of this portfolio model has the discretion to put 100% of capital to work.

Minimum Account Size - $50,000

Fee and Fee Structure - Clients pay a management fee to Turner Capital Investments, LLC.  This management fee covers all management services.  There are no trade transaction fees. This is currently a fee of 0.2% (annual) of the net asset value of the client account regardless of the number of trades made in the client account.  TCI management fees range from 1% to 2% of the net asset value of client account(s).  The percentage rate is based, in part, on the aggregated total of an individual client's accounts being managed by TCI (see "Family Discount", below).  One-twelfth of the fee is deducted from the client's account(s) monthly.  

Family Aggregation for Fee Assessment - When calculating the net asset value of a client's account for the purpose of determining the appropriate management fee, TCI aggregates all the client's personal accounts, plus all of the client's family accounts, such that the aggregate amount of the client plus family accounts are used to get the lowest possible management fee for the client and the family accounts.

Cash Strategy for Client Accounts – When client accounts are not fully invested in individual equities, the balance is typically held in money markets.  It is the goal of the Manager to keep client accounts fully invested except when the Turner Capital Composite Index is inside the Transition Zone, but depending on market conditions and risk assessment, the Manager may choose to have client accounts in cash or cash equivalents.

The key to knowing when to have a bullish, bearish or go-to-cash investment bias hinges, in our opinion, on measuring the current trend of the market.  Having the correct investment bias is crucial to improving the odds of making better, more profitable, trading decisions.

Management Approach - We consider having the correct or best investment bias (mindset) is an important part of the battle when determining whether to be a buyer equities, holding cash, a buyer of short position equities such as inverse ETFs, and certainly, when to sell.  The key for our investment strategy is knowing when the market (as defined by the Turner Total Market Index) has moved from a bullish trend to a bearish trend and vice versa.  This is done by measuring the current trend and mathematically determining whether the direction of the market's trend.  One of the tenants of our Market-Directional investment methodology is the assumption that the current market trend will continue until it doesn't; so, it behooves us to be vigilant in the measurement of the current market trend to see if it has stopped trending in its previous manner and has reversed course.  Certain key assumptions are made in this quantitative analysis; one of which is the "Turner Transition Band".

We believe that the best time to have capital exposed to the market, is when the risk of the market changing directions is relatively low; as in the case of longer-trend bull market cycles and longer-trend bear market cycles.  When the market is not in a longer-trend, as in the case when the market is inside the Turner Transition Band, we believe risk of loss of capital is elevated and the tendency of whip-saws (moving in and out of the market).  We look for opportunities to be invested in the market in both bull and bear cycles, but move to cash when the market is in the higher risk, Turner Band.

Turner Capital has developed a proprietary market index called, "The Turner Total Market Index".  This index is a composite of the S&P 500, the Nasdaq, the Russell 2000 and the DJIA.  The Turner Transition Band is a volatility band, the width of which is one standard deviation of normal volatility of the Turner Total Market Index, on either side of a 200-day moving average of the Turner Total Market Index.  The investment bias (whether to be bullish, neutral or bearish) is predicated on where the weekending close of the Turner Total Market Index is located in relation to the Turner Band.  The investment bias is bullish if the Total Market Index is above the Turner Band and trending higher; neutral if the Total Market Index is inside the Turner Transition Band; and, bearish if the Total Market Index is below the Turner Transition Band.

* Turner Transition Band

** It is important to keep in mind that leveraged ETFs and leveraged inverse ETFs are complex, carry substantial risks and are intended for short-term trading. Most reset daily and seek to achieve their objectives on a daily basis, but there is no guarantee that the stated objectives will be met on any given day. Due to compounding, performance over longer periods can differ significantly from the performance of the underlying index. Leveraged ETFs and leveraged inverse ETFs may be more costly and less tax-efficient than traditional ETFs.