Classic Asset Allocation Revisited (CAAR) - Neutral

Strategy Overview

The Milwaukee Company’s Classic Asset Allocation Revisited strategy (CAAR) is a rules-based investment strategy that systematically optimizes a globally diversified portfolio of ETFs that target well-established drivers of stock and bond returns.

CAAR’s primary objective is to improve portfolio performance by managing volatility and drawdowns.  To this end, CAAR’s algorithm uses a statistical process known as “mean-variance optimization” (MVO) to calculate the greatest forecasted return for a given level of risk -- what Nobel Prize winning economics professor Harold Markowitz referred to as the “efficient frontier”.

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CAAR’s portfolio is updated monthly, using the two most recent months of market data to estimate the ideal mix of ETFs included in its fund universe.  This is a substantially shorter time as compared to traditional MVO models. Scholarly research supports the conclusion that CAAR’s shorter-term focus and faster-responding risk-management system is an effective way to minimize fluctuations and drawdowns in a portfolio’s value.

Characteristics

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  • Fund Universe

The CAAR fund universe consists of 24 Exchange-Traded Funds (ETFs) that are tied to well-established market risk factors (such as market capitalization, value, and quality).

 

  • Critical Line Algorithm (CLA)

The strategy utilizes Nobel Laureate Professor Harry Markowitz’s Critical Line Algorithm (CLA) to calculate efficient frontiers and identify optimal portfolio allocations.

 

  • Lower Drawdowns

CAAR’s algorithm utilizes a two-month lookback period, a shorter time window vs. much longer lookback periods associated with traditional MVO models.

The Milwaukee Company℠ is a tradename of Estate Counselors, LLC. The information provided herein is believed to be correct and has been obtained from sources that we consider reliable, but we do not guarantee that this information is accurate or complete.  All expressions of opinion reflect our judgment at the present time, but are subject to change. Nothing found herein is intended to be a substitute for personal investment advice. The investments discussed herein are risky in nature and involve a substantial risk of loss, and we do not in any way warrant or guarantee the results you will experience.