San Diego, California – October 25, 2024 – Counterpoint Funds, LLC, an investment adviser to quantitative mutual funds and exchange traded funds (“ETF”) specializing in defensive diversifier strategies,...
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Tracks the performance of
U.S. high yield corporate
bond ETFs when the market is trending upward.
Pivots into US 3-7 year
Treasuries during times of
market turbulence.
Utilizes multiple trend following and time-series momentum indicators to minimize model misspecification risk and unnecessary portfolio turnover.
HYTREND seeks to provide exposure to the US high yield corporate bond market while reducing risk in times of market turbulence. The index uses a blend of trend-following and time-series momentum methodologies. It draws from a wide range of parameters to reduce model risk from parameter mis-specification, reflecting a robust method of allocating to US High Yield Corporate ETFs while attempting to reduce unnecessary portfolio turnover.
The Index’s components are weighted using quantitative models to determine allocations to the two asset classes when the Index is rebalanced, which can occur daily. The Index is composed, in 20% increments (e.g., 0%, 20%, 40%, 60%, 80% or 100%), of U.S. high yield corporate bonds ETFs with the remainder in U.S. Treasury ETFs.
The first model determines a recommended allocation to U.S. high yield corporate bonds by evaluating the current market price against the dividend-adjusted moving average price data for the entire range of 100-200 day periods of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the historical momentum returns of the HYG for the same periods. The second model adjusts this recommended allocation by rounding the allocation to the nearest 20% increment, but only allows the final allocation to U.S. high yield corporate bonds to move by a 20% increment day-over-day. The final allocation remains unchanged if the rounded allocation from the second model varies by more than 5% from the recommended allocation of the first model.
By default, the model will allocate the entirety of its U.S. treasury position to a 3-7 year Treasury ETF. If the 3-7 Year Treasury ETF experiences a 3% drawdown or greater after initial entry from the system, at any weighting of 20% or greater to the Index, the system will reallocate the Treasury portion of the model entirely to U.S. T-Bill ETFs. Only when Index returns to a 100% high yield corporate bond weighting will the model allocate again to a 3-7 year Treasury ETF.
Source: Counterpoint Funds. There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses.
As demonstrated above, the model evaluates the total percentage of today dividend-adjusted price of HYG ETF above many moving averages (each one, from 100-day to 200-day) as the dashed-black line, and likewise the percentage of momentum signals (lookback price-changes above zero percent, from 100-day to 200-day lookbacks) as the dotted-green line. This signal is aggregated into the raw score, or the red line. This is the first model.
The second model adjusts the actual portfolio allocation, displayed in solid blue, by rounding the raw score to the nearest 20% increment, but only allows day-over-day changes in allocation to High Yield Bond ETFs by 20% increments. A final adjustment is performed to keep the allocation unchanged day-over-day in the event the absolute change to the rounded allocation from earlier in the process varies by more than 5% the absolute change of the first model (the red line). This step exists to lower turnover and reduce the impact of signal noise on the actual allocation.
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The index methodology is designed to determine day-ahead index position as of the day prior to index rebalance.
Move/adjust the above scroll bar to see historical index positioning.
Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.
Past performance is no guarantee of future results.
The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.
Investments in the CP High Yield Trend Fund involves risk including possible loss of principal and may not be suitable for all investors. The Fund is new with a limited history of operations. There is no assurance that the Fund’s strategy for allocating assets will achieve its investment objectives. The extent that Authorized Participants (AP) exit the business or are unable to proceed with creation or redemption orders, Fund shares may be more likely to trade at a premium or discount to net asset value and possibly face trading halts or delisting. Issuers of a security and other instruments may not be able to make principal and interest payments when due. Fluctuation in the value of equity securities held by the Fund causes the net asset value of the Fund to fluctuate.
The Fund is structured as an ETF and is subject to risks including, market price variance, trading issues and not being individually redeemable. ETF investments involve advisory and other expenses which will be indirectly paid by the Fund. The Fund’s investments may include ETFs with foreign securities, which are subject to risks beyond those associated with investing in domestic securities. Growth stocks may react differently to market events and are subject to more abrupt market movements. The Fund’s income may decline when yields fall and an increase in rates may cause the value of securities held by the Fund to decline. High yield or ‘junk’ bonds present greater risk than bonds of higher quality. There is no assurance that the Index Provider will compile, compose or calculate the index accurately and the Fund’s performance may diverge from that of the index.
ETF shares are not redeemable with the issuing fund other than in large Creation Unit aggregations. Instead, investors must buy or sell ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling. The NAV of the Fund’s shares is calculated each day the national securities exchanges are open for trading as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time (the “NAV Calculation Time”). Shares are bought and sold at market price (closing price) not NAV. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined).
An active secondary market for the Fund’s shares may not exist. Although the Fund’s shares will be listed on an exchange, subject to notice of issuance, it is possible that an active trading market may not develop or be maintained. There is no guarantee that distributions will be paid.
5516-NLD-09/01/2021
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