The ISA Advantage

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A commitment to active risk management and a global pursuit of index-linked returns

across the asset spectrum underpins an investment philosophy that is the hallmark of

the Index Strategy Advisors advantage.




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1. Dynamic Asset Allocation Makes a Difference

Our disciplined approach helps to avoid

performance impairing volatility.

Our focus on asset allocation is dynamic and based on a

quantitative framework that continually analyzes the

unique catalysts and drivers of performance for each

investment sector. Given the general efficiency of the

capital markets, we exclude all stocks from investment

consideration. Our 100% index-focused approach

combines opportunistic tactical investing by identifying

index-linked asset classes, where relative over- and under-

valuation exist, with strategic and incremental investing in

sectors expected to outperform over longer periods of

time.




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1. Dynamic Asset Allocation Makes a Difference: ISA vs. Traditional Managers

Compare ISA to traditional investment manages to see how we're different.




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2. Rigorous Research

We are focused on furthering

understanding of the drivers of risk

and opportunity in the New Era of

investing.

The foundation of our research is a powerful

algorithm library. Our research methods are

at the forefront of technology, adaptive, and

based on the new realities of extremely

volatile and intricately interconnected global

financial markets.




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Global awareness is

critical to measure and

understand the true

scope of risk.

With the development in the

liberalization of capital

movements and the

securitization of stock markets,

international financial markets

have become increasingly

interdependent. ISA algorithms

perform surveillance on global

markets 24 hours a day, 7 days

per week.




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Global awareness is

critical to measure and

understand the true

scope of risk.

With the development in the

liberalization of capital

movements and the

securitization of stock markets,

international financial markets

have become increasingly

interdependent. ISA algorithms

perform surveillance on global

markets 24 hours a day, 7 days

per week.




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For the first time in over 70 years, 2000-2010 challenged investor expectations of

"normal returns.”




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For the first time in over 70 years, 2000-2010 challenged investor expectations of

"normal returns.”




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Relative to prior post-correction

rallies, the current recovery is robust.

Though immensely disruptive across all global

markets, the financial crisis has passed. In

capital market terms, the global markets have

recovered and shown tremendous resilience

compared to prior recession recoveries. ISA is

committed to identifying the sectors and

regions which will lead the recovery and

advance into the next decade. Compared with

prior recoveries, the current rebound ranks

among the strongest.




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Looking forward, experts disagree on

the range of potential returns.

The range of global stock market returns is

not obvious and underscores our focus on

analyzing the real drivers of opportunity

and risk. In the current post-crisis

environment, we believe that an

investment manager’s best strategy for

generating sustainable returns is to

manage client portfolios more actively and

switch between assets and asset classes

when necessary or opportune, according

to where the risks are lowest or the

potential returns most attractive.




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3. Global Diversification & Asset Allocation

ISA portfolios are constructed and managed

with carefully screened, index-linked ETF

securities.

Investment portfolios should be built around a strategic

and long-term approach. However, as markets fluctuate

and risks and opportunities emerge, sometimes

dramatically, it is prudent to account for them when

establishing an asset allocation policy. Through global

diversification and dynamic asset allocation, ISA

portfolios are designed to help investors navigate

significant, unstable movements in financial markets,

following a path to potentially increased returns, all

while managing risks through a disciplined process.




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ISA monitors international

conditions where emerging markets

are playing a much larger role in the

global economy.

The developed markets generally have

greater exposure to emerging markets than

at anytime previously. We believe that a

longer-term consequence may be higher

volatility in investment portfolios, given that

emerging-market economies tend to be

more volatile than mature economies.




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global economy.











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global economy.











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global economy.











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4. A Disciplined Investment Process

The ISA investing process

integrates protection and growth

objectives.

The ISA investment process achieves growth and

protection and is built on a three step process:

Downside Risk Management, Portfolio

Optimization, and Compound Growth. The

achievement of these three areas of focus is

possible because of the integration of the

components within each objective: Capital

Preservation, Situational Logic, Multifactor Risk

Management, and Enhanced Return each blend

functionality with the larger objectives.




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4. A Disciplined Investment Process: Downside Risk Management

Capital Preservation: A two-decade

pattern of low volatility has been

broken.

Today's markets, coupled with the economic

information within them, move faster than any

other time in history. These movements are both

volatile and correlated. Co-movements across

international economies and asset classes are

exacerbated by excess volatility, exposing

portfolio holdings to risk at greater levels than

ever before. Not only have the rules of investing

changed, but the tools necessary to manage an

investment portfolio have changed forever as

well.




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broken.











well.




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broken.











well.




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broken.











well.




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Capital Preservation: The difficulty

of recovering losses makes capital

preservation a priority.

The timing of corrections, market shocks, price

dislocations, and other macro events may be

impossible to predict; but are persistent in their

recurrence. Such events reveal massive data, that

in our view, inform a statistically meaningful risk-

reward trade-off assessment in portfolio

allocations. We introduce a level of downside risk

management through dynamic asset allocation

based on these data, events and or specific

market conditions that reflect the optimal

risk/reward balance for the expected returns of

portfolio holdings.




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ISA employs situational logic to inform a prudent response to market shocks.

Every market correction is unique, or unique enough that many investors are unprepared when the market

turns. We leverage historical risk factor interactions which translate to the present, and monitor the strongest

factor interactions within these pairings for objective confirmation of a downtrend. As our market assessment

improves or deteriorates, risk is reduced or assumed accordingly.




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Situational Logic: ISA portfolios are managed for each client's needs and situation.

ISA algorithms locate information to determine how price trends may occur and the magnitude of their

consequences amid a constantly evolving investment environment; however, algorithms do not make

investment decisions. We integrate human temporal logic by intellectually exploring the full space of possible

outcomes for a given situation and sequence, fully considering the breadth of pitfalls or opportunities

inherent to the present environment and client situation.




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Multifactor Risk Management: Macro risk

factor exposure by ISA portfolios reflect

multiple dimensions of risk.

Differences in market exposures to compensated risk

factors largely explain the returns between investors. By

applying multi-dimensional regression analysis, ISA

algorithms can analyze which market/macro asset classes

the portfolios are most exposed to (e.g. oil, commodities,

interest rates, currencies, other financial markets, industry

sectors, etc.) and weigh heaviest in influencing risk. Risk

factor analysis calculates the exposure to a provided set of

parameters, while risk factor screening finds the

parameters that best describe the portfolio

performance.




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Beta Factoring: Keen awareness of co-movement

levels increases risk management effectiveness.

No investment program can predict or control the direction of the

markets. Achievement of outstanding returns is predicated on

what is within investors’ reach. Beta refers to an inherent sensitivity

to the Large Cap U.S. Equity Markets. Since equity market

movements are generally recognized to represent ‘beta’, beta

factoring describes the process for determining which securities

move in tandem with equities and to what degree a specified

investment may exceed the performance (or underperformance) of

a specific index (e.g. S&P 500). When powerful trends unfold,

selection of investments based on beta factor can provide

correlated, yet excess performance of a given benchmark.

Appraisal of beta and beta drift for all ISA investment candidates

serves as a measure of vulnerability to equity, volatility, and scoring

of the potential magnitude of expected returns. For this reason,

the vast new supply of sector, regional, and commodity ETFs have

enhanced return potential for ISA clients so excess market returns

and improved risk management are newly within reach.




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ISA risk factors support real-time data-driven analysis.

To be useful, a risk model must be effective at identifying important interactions between risk factors. ISA risk

analyses calculate a set of traditional market risk measures on overall portfolios as well as drill down into asset

classes, security types, regions/countries, sectors, individual securities and the interactions among them. The

calculations involve advanced mathematical models that adapt to the current trading environment.




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Efficient cost containment generates enhanced return.

ISA employs a two tiered trading structure to execute orders for client portfolios: Commission-Free Window Trading,

and Real-Time Market Trading with direct links to major trading venues.

Our most cost-effective trading method is a patented, commission-free window trading system. Our window trades are an innovative way to fill

orders efficiently for long term investors. Instead of being executed immediately, window trades are grouped together twice a day for

execution, matched internally when possible, and any remaining orders are then sent to the market. Our commission-free window trading

system saves our clients time and money with advantages that include:

• Ability to buy and sell an entire portfolio in a single transaction.

• Unlimited trades with no commissions, no transaction fees, and no ticket charges.

• The ease of placing orders in dollar amounts rather than shares.

• Capability of buying and selling whole or fractional shares.

Window Trading




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Efficient cost containment generates enhanced return.

ISA employs a two tiered trading structure to execute orders for client portfolios: Commission-Free Window Trading,

and Real-Time Market Trading with direct links to major trading venues.

Real-Time Trading




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Unlike traditional investment strategies,

Global Macro returns depend mostly on

manager decisions.

Academic research and real world performance

results show that, in large and efficient markets,

the selection of individual stocks does not reliably

produce superior uncorrelated returns. For these

reasons, we do not attempt to select individual

stocks; instead, we utilize asset class allocation

strategies to construct and manage broadly

diversified index linked portfolios. This process is

also categorized as a global macro approach. Our

skill, augmented by our rigorous research, reflects

investment decisions that directly impact returns

for client portfolios.




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To learn more about how our investment capabilities can

help you, please make an appointment by selecting:

TALK AN ADVISOR

at

www.indexstrategyadvisors.com

The ISA Advantage

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Transcript of The ISA Advantage