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. See Important Note regarding "Leveraged ETFs"**.
Management Approach - Our goal is to be 100% invested in the SSO (a 2x leveraged ETF) when the 200-day moving average (dma) of the Turner Total Market Index (TMI) is in a bull-trending slope and the SSO is above its 200 dma; 100% cash when the 200 dma of the TMI is flat; and, 100% invested in the SDS (a 2x leveraged inverse ETF) when slope of the 200 dma of the TMI is bear-trending.
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.
Watch this video to learn more about how the ULTRA Model works.
Turner Capital has developed a set of proprietary analysis algorithms that provide the portfolio manager with the following information:
PERFORMANCE - Turner Capital publishes the historical performance of this strategy each week in the Turner Capital "Client Letter". To get a copy of this letter, please fill out the "Start a Dialog" form. IMPORTANT: Past performance provides no guarantee, implied or otherwise, of future returns.
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 MARKET CONDITION - The Turner Total Market Index (TMI), in general, is rated by the Turner Capital software system as either in a bullish, transition or bearish trend. A bullish market trend exists when the 200-day moving average of the TMI has a positive slope. A bearish condition exists when the 200-day moving average of the TMI has a negative slope. The market is considered to be "in transition" when the 200-day moving average of the TMI is flat.
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 Turner Total Market Index (TMI) is excessively above 200-day moving average of the Index, or excessively low below the 200-day moving average of the Index.
DOWNSIDE EXIT - ccording to the Turner Capital analytics, equities held in a client portfolio will typically fluctuate within mathematically measured volatility ranges. We set stops on each holding just below these volatility ranges. If a holding's intra-day price drops below its normal volatility range, we consider the holding has moved from normal volatility to a change in trend, at which time the holding is sold.
Moving Into the Market - When the slope of the Turner Total Market Index is either in a bullish trend or a bearish trend, the manager of this portfolio model has the discretion to put up to 100% of capital to work; bull-biased investments in bull-trending markets and bear-biased investments in bear-trending markets.
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.
Potential Draw-Down - Generally, draw-downs are limited to losses incurred when a stop loss is triggered. The amount of actual loss (peak-to-trough) depends on when the client began following this strategy and the high in his/her account during that time. The average stop loss for holdings in this strategy can run from 8% to over 12%. Draw-downs, historically have been in the 8% to 12% range. A draw-down estimate should not be considered the maximum potential loss of capital. A draw-down can occur at any time; and then, at any point in the future, another draw-down can occur. Turner Capital does not warrant or promise or guarantee any maximum potential loss in this or any investment strategy that we manage.
** 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.