Day Hagan Global Asset Allocation Strategy

The Day Hagan Global Asset Allocation Strategy utilizes a quantitative framework to evaluate business and financial conditions, price trends, sentiment, economic trends, and valuations to determine which asset classes and areas of the market have—what the models deem to be—the highest probability of success. Our quantitative models allow us to overweight or underweight the benchmark’s target allocation based on these conclusions.

These are currently three variations of the Day Hagan Global Asset Allocation Strategy:

• The Growth variation that benchmarks around 80% Equity and 20% Fixed Income.

• The Moderate variation that benchmarks around 60% Equity and 40% Fixed Income.

• The Conservative variation that benchmarks around 40% Equity and 60% Fixed Income.

The different model variations will shift overall equity and fixed income allocations around their respective benchmarks when the quantitative modeling deems it appropriate. The goal is to have above-benchmark equity weighting when the models show a high probability of stocks outperforming bonds and a below-benchmark weighting when the opposite holds true.

In addition to the overweights and underweights at the stock and bond level, the strategy is further refined by shifting allocations between different regions and asset classes within the equity and fixed-income sleeves.

The equity portion utilizes the ACWI ETF (MSCI All Country World Index) as its benchmark. Specifically, the equity portion of the strategy focuses on U.S. sectors, along with international regional and individual country ETFs. The strategy will have exposure to a certain region in excess of its benchmark when the modeling shows a high probability of success relative to the other regions and less exposure when the opposite holds true.

The fixed income portion utilizes the AGG ETF (Bloomberg Barclays Global Aggregate Float Adjusted Composite Bond Index) as its benchmark. Specifically, the fixed income portion of the strategy may invest in U.S. long-term treasury, U.S. corporate investment-grade and high-yield, U.S. mortgage-backed, TIPs, international developed market, and emerging market bond ETFs. Allocations to each segment of the fixed-income markets will vary as determined by the strategy’s quantitative modeling. An allocation to a specific segment will be greater than the benchmark’s target allocation when the modeling determines a higher probability of success relative to the others.

The strategy uses dynamic models for overweight and underweight based on time-tested, quantitative modeling as a form of risk management. The strategy utilizes a dynamic risk management tool through the Day Hagan Catastrophic Stop model. The goal is for the strategy to utilize a dynamic risk management approach in a tax- and cost-efficient manner.