Morningstar Analyst Rating1


Market Volatility: An Impending Avalanche?

Macro Allocation Fund

Investment Objective

Long-Term, Risk-Adjusted Total Return

Fund Characteristics

The Macro Allocation Fund seeks to capitalize on global opportunities through active management across asset classes, geographies, currencies, and risk themes.

Investment Approach

  • The Macro Allocation Fund employs a top-down approach that focuses on general price movements in various asset classes and currencies rather than the performance of individual company securities.
  • The Fund’s macro asset allocation strategy is based primarily on the fundamental investment valuations of asset classes and currencies.
  • The Fund’s Management Team believes that investment fundamentals determine future cash flows which will ultimately drive the value of asset classes and currencies. Their goal is to identify and exploit periodic discrepancies between fundamental values and market prices. These perceived value/price discrepancies are the foundation for the Fund’s portfolio construction.

Why Consider This Fund?

Diversify Your Portfolio

  • Actively managed top-down exposure complements portfolios with bottom-up managers by providing a diversifying alpha source
  • Provides uncorrelated return stream versus long equities, which seeks to reduce portfolio volatility over time 
  • Seeks to provide equity-like returns with less volatility over a market cycle (5-10 years):
    - 10% expected average volatility
    - Market  beta of 0.3 
  • Multi-asset portfolio of equities, fixed income, and currencies complements other alternative strategies (e.g. commodities, real estate, and real assets)  

Manage Macro Risks

  • Not a black box approach - investment process fully transparent and fundamental at its core 
  • Fundamental analysis combined with continuous macro market analysis, including game theory, identifies opportunities and provides insights on how to navigate macro risks 
  • Direct investments in markets/currencies helps to avoid idiosyncratic exposures and liquidity risks of investing in individual securities

Seek to Enhance Return Potential

  • Broad, global mandate provides opportunistic exposure to specific macro events 
  • Unique valuation-based currency management (not momentum investing) provides a diversified source of alpha and allows team to take advantage of market opportunities independently of currency concerns 
  • Ability to take long and short positions provides potential to benefit from both positive and negative market events 
  • Dynamic investment approach enables team to quickly minimize risk in the portfolio or efficiently and rapidly increase risk to pursue opportunities  


How does this Fund fit into an existing portfolio?

This portfolio is designed to provide investors with active returns in macro allocations which are additive to the active returns in more narrowly defined mandates. For example, we estimate that a 20% allocation to this strategy (rebalanced pro-rata) represents the minimum active risk portfolio for an actively managed, classic 60/40 portfolio.

This Fund will tilt an overall portfolio in response to tactical opportunities and changes in the attractiveness of risks around the strategic allocation set by an advisor.

Alpha: A measure of a portfolio's return in excess of the market return, after both have been adjusted for risk. It is a mathematical estimate of the amount of return expected from a portfolio above and beyond the market return at any point in time. Beta: A quantitative measure of the volatility of the portfolio relative to the overall market, represented by a corporate benchmark. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile, and could be expected to rise and fall more slowly than the market. Game Theory: Events, geopolitics, and policy changes affect market prices. Game theory, which considers the interests and incentives of governmental and economic leaders, provides a framework for making sense of geopolitical and macroecomonic developments. Standard Deviation (Expected Volatility): A measure of the portfolio's risk. A higher standard deviation represents a greater dispersion of returns, and thus a greater amount of risk. The annualized standard deviation is calculated using monthly returns.

The Fund involves a high level of risk and may not be appropriate for everyone.  You could lose money by investing in the Fund.  There can be no assurance that the Fund’s investment objective will be achieved.   The Fund holds equity exposures, which may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in bond markets is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed.  Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.   Investment return, principal value, and yields of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.  Investments are subject to a number of types of risk, including counterparty and contractual default risk. For a more detailed explanation and discussion of these and other risks, please read the Fund’s Prospectus. The Fund is designed for long-term investors.


1© 2017 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
The Morningstar Analyst Rating is the summary expression of Morningstar's forward-looking analysis of a fund. The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the manager research analysts of Morningstar. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts use this five pillar evaluation to determine how they believe funds are likely to perform over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflect an Analyst’s conviction in a fund's prospects for outperformance. Analyst Ratings are continuously monitored and reevaluated at least every 14 months.
For more detailed information about Morningstar's Analyst Rating, including its methodology, please go to: Analyst Rating for Funds Methodology.
The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings involve unknown risks and uncertainties which may cause Morningstar's expectations not to occur or to differ significantly from what we expected.
The Morningstar Multialternative Category represents the average annual composite performance of all mutual funds listed in the Multi-Alternative Category by Morningstar. Morningstar’s Multi-Alternative Category includes a variety of strategies focused on total return across a broad mandate.