Dynamic Conservative Allocation Principled Portfolio Solutions Taxable As Of Third Quarter 2012 Exchange Traded Products SM The dynamic conservative portfolio is managed with a short to intermediate term horizon. Target allocations are primarily focused on high quality fixed income assets to provide income and reduce the potential for significant loss. A moderate allocation to growth oriented assets is included to provide an element of real growth potential. Growth assets are diversified across domestic and international stocks, and emerging markets. The equity portfolio emphasizes large cap stocks but also has meaningful exposures to small and mid cap stocks. The DSA sleeve manages risk by adjusting the equity/fixed mix in response to evolving market conditions and the reward-for-risk opportunity. This portfolio is appropriate for investors with a low to moderate risk tolerance. Portfolio Risk Meter Performance Statistics Time Period: Nov-00 - Sep-12 Strategy Allocation Current Fund Allocation Portfolio Objective Less Opportunity More Opportunity Less Risk More Risk Portfolio Benchmark Reward Measures 5.3 6.6 Inception to Date - 1.4 Excess Return (%) - 1.7 Risk Adjusted Excess(%) Risk Measures 5.9 5.6 Standard Deviation (%) - 0.9 Beta - 2.0 Tracking Error (%) Reward vs Risk 0.527 0.794 Sharpe Ratio - 0.7 Information Ratio Experience Measures - 100.0 Upside Capture (%) - 76.9 Downside Capture (%) 11.3 9.8 Best Quarter (%) -14.1 -11.1 Worst Quarter (%) DSA Core Strategy Weight 75% Core : Exchange Traded Products : Conservative 25% DSA : Dynamic Strategic Allocation Portfolio Ticker Description Asset Class Role Style % Cash Equivalents CASH 16.5 Cash Income Short SPDR Nuveen Barclays Capital Muni Bond TFI 30.5 Investment Grade Municipal Bonds Income Intermediate-Long SPDR Nuveen Barclays Capital S/T Muni Bd SHM 13.1 Investment Grade Municipal Bonds Income Short Market Vectors High-Yield Muni ETF HYD 10.0 High Yield Municipal Bonds Income Long Vanguard REIT Index ETF VNQ 2.5 Real Estate Real Return Core SPDR S&P 500 SPY 13.9 Large Capitalization Stocks Growth Core Utilities Select Sector SPDR XLU 1.0 Large Capitalization Stocks Income Utilities iShares Russell 2000 Index IWM 1.2 Small-Mid Capitalization Stocks Growth Core SPDR S&P MidCap 400 MDY 1.2 Small-Mid Capitalization Stocks Growth Core Vanguard MSCI EAFE ETF VEA 4.4 International Stocks Growth Core iShares MSCI EAFE Small Cap Index SCZ 1.0 International Stocks Growth Core Vanguard MSCI Emerging Markets ETF VWO 2.9 Emerging Market Stocks Growth Core SPDR S&P Emerging Markets Small Cap EWX 0.7 Emerging Market Stocks Growth Core JPMorgan Alerian MLP Index ETN AMJ 1.0 Commodities Income MLP - Energy United States Commodity Index USCI 1.0 Commodities Real Return Diversified Basket Available Through Kovack Advisors Exchange Traded Products_A_TX_Advanced Model Blend_Tilts -- See Disclosures on Last Page
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Dynamic Conservative Allocation
Principled Portfolio SolutionsTaxable
As Of Third Quarter 2012
Exchange Traded ProductsSM
The dynamic conservative portfolio is managed with a short to intermediate term horizon. Target allocations are primarily focused on high quality fixed income assets to provide income and reduce the potential for significant loss. A moderate allocation to growth oriented assets is included to provide an element of real growth potential. Growth assets are diversified across domestic and international stocks, and emerging markets. The equity portfolio emphasizes large cap stocks but also has meaningful exposures to small and mid cap stocks. The DSA sleeve manages risk by adjusting the equity/fixed mix in response to evolving market conditions and the reward-for-risk opportunity. This portfolio is appropriate for investors with a low to moderate risk tolerance.
Portfolio Risk Meter
Performance Statistics Time Period: Nov-00 - Sep-12Strategy Allocation
Current Fund Allocation
Portfolio Objective
Less Opportunity More Opportunity
Less Risk More Risk
Portfolio Benchmark
Reward Measures
5.36.6Inception to Date
-1.4Excess Return (%)
-1.7Risk Adjusted Excess(%)
Risk Measures
5.95.6Standard Deviation (%)
-0.9Beta
-2.0Tracking Error (%)
Reward vs Risk
0.5270.794Sharpe Ratio
-0.7Information Ratio
Experience Measures
-100.0Upside Capture (%)
-76.9Downside Capture (%)
11.39.8Best Quarter (%)
-14.1-11.1Worst Quarter (%)
DSA
Core
Strategy Weight
75%Core : Exchange Traded Products : Conservative
25%DSA : Dynamic Strategic Allocation Portfolio
Ticker Description Asset Class Role Style %
Cash EquivalentsCASH 16.5Cash Income Short
SPDR Nuveen Barclays Capital Muni BondTFI 30.5Investment Grade Municipal Bonds Income Intermediate-Long
SPDR Nuveen Barclays Capital S/T Muni BdSHM 13.1Investment Grade Municipal Bonds Income Short
Market Vectors High-Yield Muni ETFHYD 10.0High Yield Municipal Bonds Income Long
Vanguard REIT Index ETFVNQ 2.5Real Estate Real Return Core
Performance: The performance shown on this report represents model results and does not reflect actual account performance or a composite. Model performance results are simulated. Model results represent what an investor’s performance would have been, had they been invested in the stated time period in the exact investments and allocations of the model shown, with quarterly rebalancing. Model results do not take into account any cash flows in or out of the portfolio or transaction costs, factors that can decrease performance results. Investment selections displayed represent model target holdings as of quarter end and can change any time subject to SightLine’s discretion. ETF returns are calculated by closing NAV as supplied by Morningstar. In the event the investment product (exchange traded fund or note) selected does not have more than five years of history, for the period where the product did not have a track record, the product’s respective index was used and the returns were reduced to reflect the current fees charged by the investment product provider.
Diversification: All PPS portfolios are built upon the important
principle of diversification to manage your risk-return experience
over time. All PPS portfolios are diversified both across and within
asset classes to help reduce risk and capture long-term returns.
Goal-Based Asset Allocation: Each of the five PPS asset allocations
has four implementations, differentiated investment objective, style,
and tax treatment, for a total of twenty portfolios from which you
can choose. You select the portfolio that meets your needs.
Efficient Portfolio Construction: With PPS ETF-based portfolios,
investors benefit from an efficient portfolio design. Each investment
selection is based on key diversification, expense, and liquidity
criteria to manage costs and achieve the target profile of your
chosen asset allocation.
Monitoring and Risk Management: Key drivers that underpin
the results of your asset allocation strategy – your investment
selections and portfolio construction – are monitored and
adjusted as necessary on an ongoing basis. Liquidity risks
reflected in bid/offer spreads, deviations from NAV, and trading
volumes are monitored to help control implementation costs.
serves to help manage risk, maintain your intended allocations
and keep your portfolio on target with your objectives.
Tax-Aware Implementation: Each PPS asset allocation offers
two implementations, one for taxable accounts and one for tax-
deferred accounts. Product selections and rebalancing strategy
are tailored to the tax treatment of your accounts.
Available Through Kovack Advisors Exchange Traded Products_A_TX_Advanced Model Blend_Tilts -- See Disclosures on Last Page
Dynamic Conservative Allocation
Principled Portfolio SolutionsTaxable
As Of Third Quarter 2012
Exchange Traded ProductsSM
Disclosures (continued)
Fees: All performance results are shown gross of wrap (platform) fees and advisory fees, but net of fees for the underlying investments. Performance of the exchange traded funds and notes is calculated after management, administrative and other costs taken out of the fund or note’s assets. Actual performance results will be reduced by fees including, but not limited to, wrap program fees and other costs, such as custodial or transaction charges, advisor fees, and any other expenses associated with the advisory account. Assuming two investments have identical returns, the investment with lower costs would provide a higher overall projected value. The net compounded impact of the deduction of such fees over time will be affected by the amount of the fees, the time period, and investment performance. For example, an account with a 1% annualized investment management fee, deducted quarterly, with 5 year annualized performance of 10% before fees, will have a net annualized performance of 8.93% after fees. Compounding will similarly affect the account's performance on a cumulative basis. Specific calculations of net of fees performance for a given fee structure and gross of fees performance can be provided upon request. Your actual performance will vary. Investment Advisory fees are described in Part II of the adviser’s Form ADV. Benchmarks: This model performance was calculated on a total return basis. It includes the reinvestment of dividends and capital gain distributions. All values are based on the U.S. dollar. Benchmark returns are calculated based on the broad allocation equity / fixed income / cash defined above utilizing the respective benchmarks for each broad asset class: Equities : MSCI ACWI, Fixed Income : Barclays Aggregate Index, Tax Exempt Fixed Income: Barclays Muni Index, and for Cash: 3 Month T-bills. Portfolio data is from MPI Stylus and Morningstar. Portfolio level qualitative data is derived from Morningstar.
Backtested Results: For the Core sleeve, which comprises 75% of the portfolio, performance results were based on the assumption that the target holdings shown were held for the duration of the performance history shown above. For the Dynamic Asset Allocation sleeve, which comprises 25% of the portfolio, performance results for this sleeve were calculated via a backtested model. Investors should note that there are frequently material differences between hypothetical, back-tested or simulated performance results and actual results subsequently achieved by any investment strategy. Unlike an actual performance record based on trading actual client portfolios, hypothetical, back-tested or simulated results are achieved by means of the retroactive application of a back-tested model itself designed with the benefit of hindsight. Simulated performance does not reflect the impact that material economic or market factors might have on an adviser's decision making process if the adviser were actually managing a client’s portfolio. The back-testing of performance differs from actual account performance because the investment strategy may be adjusted at any time, for any reason and can continue to be changed until desired or better performance results are achieved. No representation is made that any index or account will or is likely to achieve profits or losses similar to those shown. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical, back-test or simulated results are neither indicators nor guarantees of future returns. Potential investors should carefully consider whether an investment is suitable for them in respect of their financial situation and their ability to bear risk of loss. SightLine assumes no responsibility or liability for any damage or loss whatsoever directly or indirectly resulting from use of the Information or investments entered into based thereupon.
Available Through Kovack Advisors Exchange Traded Products_A_TX_Advanced Model Blend_Tilts -- See Disclosures on Last Page