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August 17, 2018Helping Investors With the Crucial In or Out Decision (5:34)
David Schassler
David Schassler
Portfolio Manager and Head of Quantitative Investment Solutions
Commodity Strategist Roland Morris and Portfolio Manager David Schassler discuss the philosophy underlying the VanEck Guided Allocation Suite of funds and how it approaches the question of when to be invested in the market and when not to be based on existing market conditions. VanEck’s Guided Allocation Suite is designed to participate meaningfully in bull markets, and seeks to de-risk in bear markets by minimizing the impact of market downturns.

VanEck’s Guided Allocation Philosophy: Helping Investors With the Crucial In or Out Decision

ROLAND MORRIS: Hello, I’m Roland Morris, the firm’s Commodity Strategist. I’m here today with David Schassler, who heads up our PARS Group, our Portfolio and Risk Solutions Group. Today we’re here to discuss some new products we’ve developed for investors; we refer to them as Guided Allocation products. David, tell me some of the thoughts you have about these Guided Allocation products and what’s leading the charge into this area of investing.

DAVID SCHASSLER: Each fund, if you think about each fund independently, they share one common philosophy and that’s there’s certain periods when investors want to be invested, which is most of the time. But there’s certain periods when you don’t want to be invested. So each of these strategies helps investors with that most important decision, which is, do you want to be invested now or don’t you want to be? And when you don’t want to be invested, there are certain periods when it’s better not to be invested; during those periods we’ve found that cash is truly the only risk-off asset.

We identify those periods of time with objective data-driven indicators to remove the human emotion out of the process. So the whole idea is be invested most of the time, get paid a positive risk premium to hold those assets. And then there’s certain periods when you want to be really defensive. And during those periods we will own up to 100% cash in each of these products.

MORRIS: David, could you explain in brief, the three products that we’ve developed that are now available to investors?

SCHASSLER: So the first product is the VanEck NDR Managed Allocation Fund. This is a global tactical asset allocation fund that helps investors determine, do you want to be in stocks, bonds, or cash? The neutral allocation is 60% in stocks, 40% in bonds. And then we pivot up and down based off how much risk is in the market. The second product is a long/flat equity ETF. The ticker is LFEQ. I think of this as the S&P 5001with guardrails. So what it does is it looks at the risk of each of the 22 industries in the S&P 500, and says, “Is there a lot of risk in each of these industries from a technical perspective?” And if there is, it will scale up and into and out of cash, depending on the risk in the market. And the last one is the real asset allocation ETF. The ticker is RAAX. And that product is really designed to benefit from the upside benefits of real asset investing. We know that real assets have historically outperformed other asset classes during periods of rising inflation, during periods of strong global growth. This strategy tries to capture most of those upside benefits, but we’ve also found with investors that most of them just can’t tolerate the high volatility associated with real asset investing. So each step of the investment process for the real asset allocation ETF is literally designed to look at it and say, “Well, how do I reduce risk at each point in the process, while giving you the upside benefits?”

MORRIS: At the end of the day, though, all of these models are rules-based models. We don’t change them; it removes the emotion from investing as well.

SCHASSLER: That’s exactly the key. Each model is driven 100% from the model, there’s no discretionary overlay. That’s key. Human beings are notorious for doing the wrong thing at exactly the wrong time. That happens because when you’re in a big sustained drawdown, stress takes over, fear takes over. If you have a process that basically comes up with a game plan way ahead of it, before actually a negative event unfolds, then you’re way better off for it. So we find that an objective data-driven process successfully removes the human emotion out of the process and gives investors a better shot of generating excess performance.

MORRIS: In essence one of the things we have accomplished with these three products is to reduce the volatility inherent in all markets, and in particularly very volatile markets like the real asset sectors. It’s another way, in a sense, for investors, by keeping those profits through the cycle, they can actually compound their money in a slightly different way as opposed to a buy-and-hold strategy for long periods of time. This way they can keep their profits and compound in that fashion.

SCHASSLER: That’s exactly right.

MORRIS: Excellent. Interesting that we’ve moved into this area at VanEck. In some ways this is kind of a marriage of our fundamental investing, long-only investing heritage, particularly in emerging markets and global markets and natural resources. And we’re sort of marrying that with some of the stuff your group is doing in quantitative analysis. Is that another way to look at it?

SCHASSLER: I think that that’s right. Each idea that we put into these portfolios, these models, is based off a fundamental underpinning.

MORRIS: Wonderful. Well, I think this has been a very interesting discussion. I really enjoy some of these new products we’re developing. I think they’re going to be very important for investors, particularly as we enter a period where really asset prices are fair or overvalued in many sectors. And I think this risk-managed solution could be very important for investors.

SCHASSLER: Thank you, Roland.

MORRIS: Thank you for spending time with us today. For further information, please visit VanEck’s website, There’s information about these Guided Allocation products as well as many other investment products that we provide to investors globally. Thank you.

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1S&P 500®Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an index, it is unmanaged and is not a security in which investments can be made.

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