We sell individual stocks and go into cash when their momentum triggers a sell signal and buy back once the sell side momentum has diminished which triggers a buy signal. If you have clients that do not like losing money when stocks correct then the RAAMPS quant and possibly our portfolios may be a good fit for your clients.

Nearly 20 years ago, RAAMPS was 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. Initially, 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, we found that by optimizing a combination of fundamental, qualitative and quantitative variables, we were able to do better overall by giving up a little more of the upside capture ratio which in turn dramatically improved on our downside ratio. Historically, on a monthly basis, we have captured right at 85% of the upside but limiting our downside capture to less than 10% during monthly corrections; these figures vary please check the latest performance summary report for the most recent capture ratios. Our quant has provided over 10% annualized alpha above the market while limiting our losses significantly.

To do this RAAMPS set up to limit as many variables as possible. We optimized the program by running back-testing from 1986 through 2006 and found that by removing variables we were able to provide more consistent predictable returns. Screening can also skew the results. To eliminate “picking great historical stocks” we created our teams based strictly on size; thereby eliminating another variable. We decided to base our quant program on term sentiment or momentum as stocks tend to continue in a certain direction, either up or down, for a considerable amount of time. Past performance shows that while we achieved the goal of reducing losses during corrections we actually did not have to forgo significant gains during market runs. We were 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. Currently, our Hidden Levers scores have a delta in the high 30s and low 40s.