Our Strategies
Assets invested in the Brinsmere Funds are managed using two independently run proprietary strategies developed by the Fund’s investment adviser, The Milwaukee Company. Those strategies are the Systematic Market Beta Strategy (“SMB”) and the Classic Asset Allocation Revisited Strategy (“CAAR”).
Systematic Market Beta strategy (SMB)
The Milwaukee Company’s Systematic Market Beta strategy (SMB) is a rules-based, systematic asset allocation investment strategy that seeks to reduce risk and enhance performance by hedging the risk of an extended bear market for stocks, bonds, or both.
When market risk is estimated to be low to moderate, SMB will invest in a “market beta portfolio” (MBP) that is reflective of the broad stock and bond markets. SMB’s portfolio allocates 60% to stocks, 35% to bonds, and 5% to commodities.
When either the stock or bond market (or both) appear to be vulnerable to an extended decline, SMB will adopt a more conservative approach by lessening exposure to those securities that are most susceptible to the perceived risk at hand.
Classic Asset Allocation Revisited Strategy (CAAR)
The intellectual foundation for The Milwaukee Company’s Classic Asset Allocation Revisited Strategy is rooted in “Portfolio Selection” (Journal of Finance, 1952), a research paper written by Nobel Prize-winning economics professor Harry Markowitz.
CAAR utilizes a unique variation of Professor Markowitz’ Critical Line Algorithm (CLA) to calculate “efficient frontiers,” defined as the various portfolios that comprise the most-efficient combinations of risk and return (i.e., the highest return for a given level of risk or the lowest risk for a given level of return).
CAAR adjusts a number of its parameters to refine the optimization process. These adjustments are based on the VIX Index, a market-based estimate of 30-day expected volatility of the U.S. stock market (S&P 500 Index).
When the VIX is determined to be high, the efficient frontier is calculated using a reduced lookback period and is rebalanced more frequently. In addition, equity and bond efficient frontiers are calculated with a greater allowance for volatility.
When the VIX is determined to be low, the volatility thresholds are lessened, lookback periods are extended, and the portfolio is rebalanced less frequently.
Discretionary Asset Allocation Modifications
Importantly, asset allocations may occasionally deviate from the strategies’ model portfolios when the funds’ investment manager believes that data utilized by the strategy does not reflect current market conditions.