Two rivers Capital - global factor rotation custom index

Strategy Materials

Strategy Insights: TRC Global Factor Rotation Custom Index

Key Features:

  • A key to the strategy is that within a single strategy it can either be defensive (Low Volatility) or aggressive (High Beta/Momentum)

  • Driven by a momentum-based, quantitative methodology that has been used at the institutional and retail levels for over 25 years

  • Tracks our very own custom index (Bloomberg ticker: TRCHBLV) that is calculated and maintained by S&P Dow Jones Indices

  • 100% rules-based, meaning the strategy cannot change. Strategies that are not rules-based can and sometimes do change

Strategy Description:

The Two Rivers Capital Global Factor Rotation portfolio is designed to track our own volatility-based Custom Index that is maintained by S&P Dow Jones Indices (SPDJI). It is called the TRC HBLV Custom Index. SPDJI calculates and reports daily Index performance based on decision rules we have provided them. Engaging an experienced, respected firm like SPDJI assures that: 1) the Index rules were applied consistently and accurately in a thorough, unbiased back-test, and 2) ongoing, the Index rules will always be applied consistently and accurately. This gives investors the confidence they need to "trust the numbers." Also, the index has a ticker symbol TRCHBLV that can be accessed at any time on a Bloomberg terminal, and provides daily returns based on SPDJI's calculations.

The strategy is based on the fact that volatility is a proven, critically important investment factor, which, if properly managed, can add greatly to controlling risk and enhancing return, through both good and bad market cycles. The strategy determines the best place to be - Momentum/High Beta, Low Volatility, or a Broad Index-within each of three global regions-U.S., International Developed, and Emerging Markets. These “best” picks are then pitted against each other to determine the “best of the best.” In short, the strategy seeks to optimize both volatility and global-regional exposures. A cash call underlies the strategy and is designed to activate during extraordinary periods in which global stocks fall in unison, as they did during the 2008-2009 financial crisis. However, even during bear markets, at least one global volatility index normally produces a positive return.