- Investment Discipline -
Participating in market advances while protecting the hard-earned assets of our clients during prolonged market declines is the foundation of the Fortunatus Protactical™ investment process. Fortunatus combines proactive tools designed to allow advisors to take an active role in the management of their clients’ portfolios with tactical asset management that has the flexibility to adjust to ever-changing market conditions.
The importance of downside protection is illustrated in the chart. The green portion of the chart shows the percentage gain needed to fully recover after each percentage decline. As losses mount, the return required to get back to even grows exponentially.
Large investment declines, especially poorly timed ones, can result in either a lower quality of life or taking on too much risk in order to make up for the shortfall. Neither one is an acceptable solution.
How Fortunatus Provides Downside Protection
Trend Analysis: For each market segment that our strategies participate in, we track the investment environment daily. We analyze the trend of each market segment to determine whether it is in a favorable or unfavorable investment environment. Our exposure to unfavorable market environments is either reduced below the target allocations for a model or eliminated altogether. By avoiding downtrending markets, we can provide some protection to our clients’ accounts, preserving the resources needed to capitalize when markets return to a positive trend.
Relative Strength Research: Relative strength, or momentum, research is used to further refine our allocations. Research shows that outperforming asset classes tend to continue to do so, and vice versa. We take advantage of this phenomenon by objectively identifying market strength and investing in the best performing segments.
Systematic & Objective Process
We believe having a systematic and objective investment process is the best way to reduce the emotion and guess-work that plagues many investors, including professionals. These behavioral mistakes can result in a large gap between the actual investment results of your clients and their investment goals. Our trend and relative strength research provides us with clear, specific, and timely guidance on each market segment that we track. With this confidence, we can act decisively and avoid many of the substantial investment mistakes that result in clients not reaching their goals.