RAAMPS was originally developed for family offices, foundations and endowments; whose Ultra-High Net Worth clients are risk and volatility averse. The initial goal was to create market-like returns with less volatility by actively managing the risk of holding a particular stock during a correction within the portfolio. We assembled a team of PhDs in Mathematics, Computer Science and Quantitative Physics to develop a program that would provide buy and sell signals to meet these objections. We set out to capture 90% of the upside and 65% of the downside. Historically these ratios would have given us market-like returns with much less volatility. However, by optimizing a combination of fundamental, qualitative and quantitative steps, we are able to do much better on both ends of the spectrum. Historically, on a monthly basis, we have captured over 100% of the upside while limiting our losses to less than 50% during monthly corrections; these figures vary please check the latest report for the most recent capture ratios.
To do this RAAMPS uses a proprietary systematic multi-factor methodology to evaluate individual stocks and ETFs on both qualitative and quantitative criteria. Basically, we use screens to focus on a particular focus, then a ranking fundamental quant to tell us what stocks to have “on the team” and finally technicals to tell us when to put a stock “into and out of the game”. The formulas, quants, algorithms are self-adjusting (think AI) allowing the program to continue to evolve over time hopefully optimizing performance. We give ourselves wide latitude in what and where we invest. Our current Riskalyze scores are in the 30s and 40s. Past performance shows that while we achieved the goal of reducing losses during corrections we actually have not had to forgo significant gains during market runs. We are focused on producing the highest alpha possible by maximizing the spread between upside and downside capture ratios. We are a diversified long-only tactical portfolio that may hold a significant position in cash during market corrections. We believe we can actively manage our portfolios not only to achieve solid returns but also to mitigate risk.
- We start by screening, focusing on a specific fundamental or tendency. However, we have found that screening alone offers little protection or alpha. It does, however, create a symbolic balance by allowing base portfolios to focus on different elements which ultimately allows the portfolio to rotate into the bullish sectors, industries and individual stocks.
- Next, we use our proprietary ranking algorithm to tell us which of the screened stocks are the strongest. Our ranking system has been reverse engineered to focus on those holdings that perform well within the triggered buy and sell signals as discussed below. This step provides significant alpha as our buy and hold “base” portfolios have done exceptionally well in the past.
- All of our portfolios are actively managed using term sentiment trading algorithms. Further, these algorithms initiate buys and sells signals; this takes human emotion out of the portfolio management and allows for the process to be repeatable. This also seems to add significant alpha, particularly during market corrections.
- Lastly, we refresh each of the portfolios using the steps outlined above. We take out stocks that are not active and/or under-performing replacing them with the strongest stocks as indicated by our screening and ranking process.