Investment Strategies

MSCM Growth Strategies

Tactical Core Model

The Tactical Core strategy invests in ETFs that have been extensively researched for their performance characteristics and can be coupled with an allocation in the Sector Rotation model (below).  The Tactical Core model is a momentum-based core strategy that seeks principal growth while utilizing risk management techniques to mitigate downside exposure. The Tactical Core model provides exposure to broad market indices including domestic large cap, mid cap, and small cap equities, foreign developed and emerging market equities, real estate and commodities. The model rebalances quarterly and adjusts the allocation to each index based on absolute and relative momentum indicators.

Sector Rotation Model

The MSCM Sector Rotation strategy uses quantitative models to evaluate a select universe of ETFs spanning 22 sectors. The goal is to capitalize on the strongest trends while avoiding the weakest trends.

The MSCM Sector Rotation strategy is for our clients that may be looking to augment their portfolios by participating in sectors with a high degree of recent momentum, which we believe could lead to higher potential returns, while limiting their exposure to the downside. The strategy allocates to the top ranked sectors based upon our proprietary relative strength measures, while our Macro Monitor continues to measure the strength of the broad market daily. Upon an alert by the Macro Monitor, the strategy will only engage sectors that have historically proven to perform well in declining markets.

Trend Models

The Trend models are rules-based trend following strategies that our clients utilize across their whole portfolio or in combination with other strategy allocations. The strategies measure the strength of the overall trend in U.S. equity markets and deploy capital during uptrends to equity Exchange Traded Funds (ETFs) accordingly. When up trending markets are not detected, the tactical strategies turn defensive, moving into either cash [Trend] or into ETFs that have historically performed well during equity market downturns [Trend Plus].

MSCM Income Strategies

Smart Income Model

The Smart Income Model portfolio will invest in dividend paying stocks and ETFs for which options are available. Cash secured puts and covered calls will be used to add income around the entry and exit points of the underlying position.

Passive Income Model

The Passive Income Model uses high yield and corporate bond instruments and preferred equities to achieve an above market income yield. MSCM will mitigate the risk of rising interest rates through the use of instruments that invest in a high percentage of floating and fixed-to-floating rate preferred equity instruments where possible. In addition, MSCM will maintain an average maturity on the bond portfolio of less than five years. In order to minimize the credit risk of any one high yield instrument, MSCM will use ETFs which hold a diversified portfolio. The investment selection has also been constructed so that correlations between model investments are relatively low.

MSCM Option Strategies

The Growth Model invests in individual securities that seek to outperform their sector counterparts. It is typically made up of higher beta, higher volatility, mid-cap names.

Covered Calls / Collars

For clients with existing, large single stock positions, MSCM can use covered calls or protective collars (sell a call for income and use the income to buy a protective put) in an effort to enhance the yield and/or provide downside risk protection.

Options Overlay

Options Overlay Our multiple options overlay strategies cover basic options trading (calls & puts), complex options (spreads – verticals, calendars, diagonals, condors), as well as advanced options trading (portfolio margin at participating custodians).

Concentrated Position Management

Many current or former public company executives end up with an over-weighting in one specific security due to option conversions, restricted stock units, etc. Often either due to an affinity for the company, sense of vested interest in success, or for tax considerations, the investor does not want to sell the stock to diversify. Measures can be taken to limit risk and increase returns without selling the underlying stock position.

Custom Strategies

MSCM’s sophisticated techniques are utilized to apply our disciplined approaches to achieve unique client goals.

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