Chapquoit Dynamic Portfolios “Offense sells tickets, but defense wins championships.” — Bear Bryant, University of AlabamaChapoquoit Dynamic Portfolios offers a rules-based defensive methodology for creating dynamic portfolios with low risk targets. We do this by using market and macroeconomic factors to systematically change asset allocations. Chapoquoit is a top-down fundamental rules-based methodology. Chapoquoit invests in a wide range of ETFs using only our quantitative factor model.Strategy Downloads & WhitepapersChapoquoit BrochureChapoquoit Fact Sheets:Aggressive Portfolio as of 12/31/18Moderate Portfolio as of 12/31/18Conservative Portfolio as of 12/31/18Chapoquoit Presentations:Aggressive GIPS PresentationModerate GIPS PresentationConservative GIPS PresentationEconomic Indicators that Affect the US Stock MarketEnhance Your Advisory Business – Partnering with ETF StrategistsPerformance Comparison of ETF Managers to Other Alternative InvestmentsMethods Used by Tactical ETF Investment Management StrategistsFor additional information contact Phil Nehro:[email protected]FAQsWhat are Chapoquoit Dynamic Portfolios?Chapoquoit Dynamic Portfolios are offered to investors as separately managed accounts. Chapoquoit employs a tactical and purely quantitative investment allocation strategy using a universe of equity, fixed income, and commodity Exchange Traded Funds. The allocations to these ETFs are driven by a number of important market and macroeconomic factors identified by our top down research process. Using an almost 40 year data history, we have successfully researched the existence of cause and effect relationships between these specific market/macroeconomic factors and the ETF investment allocations. This rigorous out-of-sample research confirms that Chapoquoit Dynamic Portfolios outperformed popular equity benchmarks while delivering bond like risk levels over a 6-8 year market cycle.What is the investment process for Chapoquoit Dynamic Portfolios?Chapoquoit Dynamic Portfolios holds the following tenets as the basis for our investment process:Past returns cannot profitably predict future performance.Using top down market and macroeconomic analysis to control monthly allocations to ETFs is a very effective investment approach.Minimizing downside risk over a market cycle, of 6-8 years targeting the overall return, generates more favorable investment results compared to a buy-and-hold approach.What are Chapoquoit Dynamic Portfolios investment objectives?Chapoquoit Dynamic Portfolios seeks to attain each of the following investment objectives.A very attractive long-term investment return, after fees.Outperform the stock market in equity bear markets. Performance that is strongly uncorrelated with stock market indices and other alternative investments.Minimize the effect of months with negative returns.Portfolio returns above the long-term average for equities, but with bond-like risk.How do Chapoquoit Dynamic Portfolios differ from other alternative investment offerings?Chapoquoit’s Dynamic Asset Allocation process is different from any other alternative investment offering because it offers all of the following:.A diversified set of ETF investmentsPatented, top-down fundamental processCompletely quantitative and computerizedA predefined rules-based methodologyA global macro approachEmploys macroeconomic data as inputsBased on a linear programming formulationAnnual portfolio turnover generally below 40%No technical tradingNo trend followingNo discretionary overridesNo illiquid investmentsNo performance fee Chapoquoit Model StructureAllocation Control Functions Chapoquoit rebalances its portfolios monthly using a set of dynamic allocation control functions that respond to recent changes in market and macroeconomic conditions. The following is an unused example of a typical allocation control function:Real Estate ETF Allocation t = α + b1 T-Bill Rate t-1 + b 2 GDP t-1 + b3 Housing Starts t-1 +…+b n Money Supply t-1Each investment in the portfolio has a similar equation. The unknown model coefficients, α and bn, are determined in a way that seeks to minimize portfolio downside risk through a linear programming formulation.Risk Controls Chapoquoit Dynamic Portfolios offers three separate investment accounts for investors with different levels of risk tolerance:Aggressive PortfolioModerate PortfolioConservative PortfolioPortfolio allocations are redetermined every month. Limits are set on the maximum allocation to each investment. Portfolios are optimized to control Downside Risk.The dynamic asset allocation model seeks to minimize the sum of monthly losses below a target return. This minimization of the semi-deviation is a key feature of the linear programming formulation employed.Multiple, Simultaneous Control FunctionsChapoquoit’s investment portfolios make monthly shifts in asset allocations among more than 25 investments at one time. Because the changes in allocation move slowly, the process could be considered a strategic approach.Chapoquoit’s three investment offerings each have an optimized asset allocation control function which is used to change the asset allocations in response to changes in the time-varying values of the market and macroeconomic factors.Our mathematical process ensures that any allocation increase to one investment is exactly offset by an allocation decrease to at least one other investment.Examples of Control FunctionsMore than a dozen market and macroeconomic factors are used to control the asset allocations to our investment set, including:Equity Dividend YieldBond YieldInterest Rate Term SpreadInterest Rate Credit SpreadMacroeconomic factors (ex: unemployment, manufacturing capacity utilization, etc)Investment sectors are also employed, including:US StocksForeign StocksLong Government BondsCorporate BondsGoldPetroleumThe above is an example of a Dynamic Portfolio Allocation over time. Strategy AvailabilityChapoquoit portfolios are offered as a separately managed account (SMA) through First National Corporation, a Registered Investment Advisor (RIA). Qualified investor rules are not applicable. The accounts are liquid and can be closed within a day. Positions are always transparent and account values can be monitored on a tick-by-tick basis. The minimum investment is $100,000. Chapoquoit is provided directly through First National Corporation utilizing Schwab, Fidelity or Interactive Brokers as custodian. Additionally we can sub-advise through managed money platforms, Unified Managed Account platforms or TAMP’s. Please contact us to request placement on a particular platform for your needs.