Proven Tactical Allocation Strategy Driven By Behavioral Crowds - Hedge Fund Alpha (formerly ValueWalk Premium)
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Proven Tactical Allocation Strategy Driven By Behavioral Crowds

C. Thomas Howard, PhD, is the CEO and chief investment officer at AthenaInvest, Inc., a Colorado-based investment manager. Tom oversees Athena’s ongoing research which has led to a number of patents, industry publications and conference presentations. He is a professor emeritus at the Reiman School of Finance, Daniels College of Business, University of Denver where he taught courses and published articles for over 30 years in the areas of investment management and international finance.

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Q2 hedge fund letters, conference, scoops etc

Behavioral Crowds

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He is the co-manager of the Athena Global Tactical ETFs, a separately managed account. As of June 30, 2018, since its inception in September 2010, it has had an annualized return of 19.0%, outperforming its benchmark, the MSCI All Country World Index (ACWI) by 900 basis points. It is rated five-stars by Morningstar.

I interviewed Tom last week.

What is the objective of the Global Tactical Strategy and what factors do you use to determine the asset allocation?

The objective of Global Tactical is to build long-horizon wealth by investing in the most attractive market at the right time. We use our patented market barometers, which capture deep behavioral currents in U.S. large and small caps as well as international developed markets, to determine our market rotation strategy.

You say that you use behavioral factors. What does that mean? What are the signals? Are they related to sentiment?

We measure deep behavioral currents by means of our three market barometers. We have identified the self-declared strategies being pursued by roughly 2,000 U.S. and 800 International active equity mutual funds domiciled in the US. These have been organized into 10 U.S. and international strategy peer groups that span the equity markets.

Our barometers capture how investors are rewarding each of these strategies over the last year relative to their long-term performance. In this way we capture the deep behavioral investor preferences for one strategy relative to another which can drive market returns. You can think of these in the same way as you do about the deep ocean currents that drive global weather.

Our market barometers represent a “put your money where your mouth is” behavioral measure as compared to the more typical “how are you feeling about…” sentiment surveys. At Athena, we only use the former type of measure to proxy for investor and fund manager behavior.

Read the full article here by Robert Huebscher, Advisor Perspectives


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