Shorebreak Capital’s Global-Macro Absolute Return Model is the underlying investment strategy for Shorebreak Capital’s Global-Macro Absolute Return Hedge Fund Strategy.
The Shorebreak Capital Global-Macro Absolute Return Model (“The Model”) is a type of absolute return strategy that seeks to achieve long-term total return using an absolute return global-macro investment framework. The Model evaluates all major global asset classes in the global financial markets by analyzing over 150 proprietary algorithmic data sets to generate each asset class with a proprietary ranking. 100% of The Model is invested in the highest-ranking asset class through the corresponding exchange-traded fund (ETF) as a means to invest in the underlying asset class.
While the above model identifies the primary asset class for the current period and cycle, the fund portfolio strategy uses the same model framework to diversify within the primary asset class, if applicable, as well as invest in other asset classes, sectors, sub-sectors, and companies that also meet the acquisition criterion of The Model. This allows the advisor to properly diversity the assets within the portfolio. The portfolio typically consists of 10 – 25 diversified positions that exhibit specific asymmetrical investment opportunities. This allows the advisor to manage risk and achieve consistent and strong long-term capital appreciation.
Unlike traditional investment strategies, where returns are generally tied to the ups and downs of single benchmark, absolute return strategies may produce positive returns in any market environment, independent of the market being up, down of flat.
Absolute return strategies offer a potential strategy diversification benefit, that may help to achieve more consistent returns over time and reduce overall investment risk, but it does not guarantee a profit or protect against a loss.
Investing success comes down to being invested in the right asset class, sectors and companies at the right time, as well as being able to manage risk appropriately. While diversification is a cornerstone in financial planning and integrated into this fund, the strategy behind the fund focuses on investing in the asset classes, sectors, sub-sectors and companies that have the highest potential returns over the next one to six months.
For example, below are the returns for being in only one asset class in each decade for the last five decades. By holding the below assets in each decade would have returned 4,198% versus the S&P return of 436%, or 3,762% higher than the S&P 500 over the same time period.
Thus, being able to identify the asset classes, sectors, sub-sectors and companies that have the highest probability of future gains in each market cycle is paramount to reach maximum investing success. While this example holds only one asset class over a decade to illustrate the efficacy of the strategy, The Model usually identifies one to three different positions annually.
|Mid Cap Equities||MDY|
|Small Cap Equities||IWM|
|20+ Year US Bonds||TLT|