About Model Portfolios

Each ETFG Dynamic Portfolio is comprised of the top ETFs as ranked by the ETF Global Quant model. The universe of U.S. Listed, equity ETFs is reviewed by the ETFG Quant model daily and represents the broadest range of industry groups, sectors and geographic regions.

Please see the most Program Overview, updated Quarterly Performance and the most recent Rebalance Commentary for the ETFG Dynamic Model Portfolio Program here:

• ETF Global Dynamic Model Portfolios - Program Overview - 2023
• ETFG Dynamic Model Portfolio Performance through 3Q 2022 - 10.4.22
• 1Q 2023 - ETF Global Dynamic Model Portfolio Rebalance Commentary - 1.3.23

Key Factors:
♦ Dynamic Selection Process
♦ Algorithm Generated Smart Beta Models
♦ Risk-Adjusted Portfolios
♦ Portfolio Flexibility to Meet Client Needs

4 "Base" Portfolios to Meet Client Needs:
♦ Aggressive Global Growth
♦ Moderate Global Allocation
♦ Balanced Global Growth & Income
♦ Conservative Global Income

Investment Process:  The ETFG^® Quant Model

The ETFG Quant model assigns a daily ranking to all relevant products using proprietary algorithms and employing dozens of industry metrics to gauge how likely an ETF will outperform the market in the foreseeable future. The selection pool includes all U.S. Listed, Equity Exchange-Traded-Funds and excludes all levered and inverse funds.  The ETFG Quant model has four primary drivers: Behavioral, Fundamental, Global Themes, Quality

I.  Behavioral

Technical– We look at a broad spectrum of technical indicators and each factor is evaluated on a short, intermediate and long-term basis

• Momentum: Captures the speed of price changes. This is the “wind at your back” factor. It captures the tendency for rising prices to persist in the future.
• Over/Under Bought: Measures how far “Stretched” a product’s move is and is based on the “regression to the mean” theory.
• Strength: Determines if there is a higher likelihood of persistence in a price move.

Sentiment– This uses market based data to quantify how investors view or feel about the market. Each factor is measured and then weighted to get a single ranking value.

• Put/Call Ratio: This is the ratio of Puts to Calls using opening transactions. As the number of puts increases relative to calls, investors are saying that they think the market will decrease in value.
• Short Interest: When a stock is shorted, the investor borrows stock that they do not own and sells it in the market. The investor hopes to buy it back at a lower price to repay the loan. They are wagering that the stock will decrease in value. Contrarian in nature, the higher the Short Interest the more unlocked, upside may exist.
• Implied Volatility: This is a proprietary model that estimates the future volatility of the product. The process first employs a model free formula to extract what investors think the future volatility of a security will be. This data is primarily driven by current option prices. If satisfactory option data is unavailable on products that do not offer options, a number of statistical processes are used to compute future volatility from additional data points.

II.  Fundamental
The fundamental score consists of 4 primary factors. We are able to aggregate these ratios for the underlying equity holdings of the ETF and roll those up to generate the ETF level data point. These weighted data points are then scored and ranked based on short and long term views and include the following:

• Price/Earnings
• Price/Cash Flow
• Price/Book Value
• Yield

III.  Global Themes
This is a qualitative rank that ETFG assigns to sectors and a number of countries based on a general “Global Macro” view. This ranking allows ETFG to over/under weight specific areas based on a few global themes that ETFG views as having significant long-term impact on the markets.The Global Macro view includes:

• Debt/GDP Ratio
• Inflation Expectations
• Unemployment
• Business Cycle

IV.  Quality
 This ranking reflects both the efficiency and quality of the ETF in question and is based upon 3 factors:

• Liquidity: This is a measure of both implicit and explicit liquidity and includes both Bid/Ask spread and volume of the ETF. This measure also allows investors to gauge how their trading might impact the price of the specific ETF. The higher the rank, the easier it should be for an investor to trade the security and to lower any implicit costs.
• Diversification: This measures how diversified an ETF is and the overall variance of the constituents. The diversification impacts the volatility of the ETF and reduces potential unwanted hidden exposures. Although not always the case, the general view is that the greater the diversification the better the ETF is structured and the smoother the path of returns.
• Sponsor Firm: This is a qualitative gauge of the quality of the sponsor of the ETF. Factors considered in this ranking include market position of the firm, size of the firm, ability to support losses and firm history. A well-funded established firm will rank higher than a startup firm just getting into the industry.
  
  

  ETFG Four "Base" Model Portfolios

Portfolio Construction:

• Portfolio strategy allows for a "Tilt" to fine-tune client needs
• 12 Unique Portfolios: 4 Base Portfolios - 8 Additional Asset Allocation “Tilts”
  
  • Aggressive, Conservative Tilt via 5% Increase/Decrease Equities to Fixed Income
• Each portfolio contains securities in four Asset Classes (Equities, Fix Income, Alternatives & Cash)
• Portfolios target 10-15 holdings
• Revised and rebalanced quarterly
• Rebalance holdings to correct asset allocation
• Rebalancing existing positions to return to “Target” weights

Portfolio Constraints:

• All selected ETFs must have $25M in AUM
• Not more than 10% in any one product
• Not more than 20% in any one Sector
• Not more than 60% in foreign investments
• Other than U.S., not more than 15% in one country
• Not more than 2 single country products
• At least one multi-country product in Non-US Sleeves