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Guided Allocation

Video Transcript

Celebrating the 3 Year Anniversary

 

DAVID SCHASSLER: The managed allocation fund’s turned three years old now. There's a lot that's happened in the last three years since we've launched. We are now ten years into a bull market, most of the time equity markets have gone up, with the exception of 2018. So, since we've launched, we’ve been overweight stocks almost all the time. We’ve averaged almost a 70% exposure to stocks since we have launched. So, the fund’s been overweight most of the time. The fund has also been defensive.

 

The fund did significantly reduce exposure after the latest sell-off. A little bit late, but, by and large, you saw the fund's flexibility. You saw how the fund does react to risk. Timing was not great this time, but we feel very confident, when we do enter one of these prolonged sell-offs, a true bear market scenario, that flexibility you saw is going to work out really well.

 

 

Advisor Feedback

 

I often have the opportunity to speak with financial advisors and understand how they view the product and how they use the product. One of the things that clearly speaks to advisors is that we use signals across technical, macroeconomic, fundamental, including, within fundamental, sentiment. And the reason that speaks to, most often, really to all advisors, is because they typically fall into one of those schools of thought. Either they believe in tactical investing, they believe that macroeconomic investing works, or they are your classic Graham and Dodd-type value investor that believes in that as well. We've got really something for everybody, because, by and large, all those investment disciplines work. We understand that and that is actually what we are tapping into. We are using each of those investment disciplines because they work, into our process.

 

The managed allocation fund is incorporated into advisors’ portfolios a couple different ways. The first as, what we will call a core allocation. So, people look at it and say: “Well this is a better way to do a classic asset allocation portfolio.” That's one way. The second way is an alternative. This fund has a lot of flexibility and I would also tell people if you're using it as a core, to keep that flexibility in mind, because at times the fund will drastically change its positioning. For example, we've been as high as 87% in the portfolio, we've been as low as around 30%, exposure to stocks. So, there's a lot of flexibility there. That is why a lot of advisors will use this as an alternative allocation.

 

Keys to Tactical Allocation

 

When we talk about what are the keys to tactically allocating well, we think that it comes down to three things. The first, you have to have a comprehensive view of risk. When I say comprehensive view of risk, looking at risk a lot of different ways. I often talk about this as looking through the lens of a camera and constantly refocusing that lens, because if you look at risk one way and only one way, you're going to miss things. So, we're constantly looking at risk, readjusting that lens to look at risk a lot of different ways. That is the first thing: a comprehensive view.

 

The second thing, removing emotion from the process is absolutely key to generating long-term performance. We get away from not having human emotion by using an objective data- driven approach.

 

And the last part is flexibility, if all of our research indicators say, Be underweight stocks, then we're going to be underweight stocks. And we're going to be so in a meaningful way, because we truly do want to protect against those big drawdown events. But at the same time, we also want to protect, or we also want to participate to the upside. So, when these indicators, in aggregate, are bullish. We want to be overweight; we want to be meaningfully overweight.

 

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IMPORTANT DISCLOSURE

The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice.

 

You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program rather than a complete program. Because the Fund is a "fund-of-funds," an investor will indirectly bear the principal risks of the exchange-traded products in which it invests, including but not limited to, risks associated with cash and cash equivalents, debt securities, exchange traded products, exchange traded products’ underlying investments, below investment grade securities, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, common stock, concentration, derivatives, emerging markets, investment style, small-, medium- and large-capitalization companies, market, model and data, operational, portfolio turnover and regulatory risks. The Fund will bear its share of the fees and expenses of the exchange-traded products. Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in an exchange-traded product. Because the Fund invests in exchange-traded products, it is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an exchange-traded product's shares may be higher or lower than the value of its underlying assets, there may be a lack of liquidity in the shares of the exchange-traded product, or trading may be halted by the exchange on which they trade. Principal risks of investing in foreign securities include changes in currency rates, foreign taxation and differences in auditing and other financial standards. Debt securities may be subject to credit risk and interest rate risk. Investments in debt securities typically decrease in value when interest rates rise. 

 

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information or call 800.826.2333. Please read the prospectus and summary prospectus carefully before investing.

 

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.

 

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