Market Update and Model Portfolio Reviews 1/31/2021
For the month of January, domestic large cap equities finished down -1.01% while Investment Grade Bonds* finished the month down -0.72%. The model strategies performed well over the month relative to both their domestic and global benchmarks. Much of the relative outperformance came from the first half of the month. On January 15, we rebalanced back to our target weightings that have drifted, generally favorably, from the prior rebalance on November 5, 2020. In an even more pronounced move, to end the month, we raised cash across all model portfolios to approximately 20%. In most taxable accounts (actual accounts that follow the model strategies) we opted to not recognize any gains or losses as we are coming up on unrealized gains potentially shifting from short-term to long-term capital gains tax rates. That said, qualified accounts, such as IRA’s, etc., participated in the cash raise on Friday afternoon for reasons discussed below.
A lot happened in January including the inauguration of the Biden Administration, the Washington Capital was stormed, the Georgia Election runoff flipped the senate majority to democrats with the 50-50 makeup from both parties and the tie going to the Vice President, a new Treasury Secretary, and prior Federal Reserve Chair, Janet Yellen was sworn in, and the unimaginable trading frenzy led by groups on social media. There is enough coverage, facts and opinions on the recent euphoria of herd traders bidding up heavily shorted companies, “for fun,” so we will try not to add more water to an increasingly saturated conversation of right or wrong. Instead, we focus on the potential for systemic risk ahead as a result of unprecedented actions by herd traders and the unintended consequences to our capital markets plumbing system. In referring to systemic risk and plumbing, more specifically we are talking about a potential small financial crisis like the one seen in 2008 where market participants were forced to raise cash (collateral), or borrow, to cover leveraged positions. So far, the situation was averted by placing limitations and restrictions on certain types of trades and specific companies. See the following snipped press statements issued by some of the larger US brokerage firms including Interactive Brokers, TD Ameritrade and Charles Schwab.
From Interactive Brokers:
A: IBKR took these actions for risk management purposes, to protect the firm and its customers from incurring outsized losses due to wild swings in prices in a volatile and unstable marketplace. IBKR remains concerned about the effect of this unnatural volatility on the clearinghouses, brokers and market participants.
From TD Ameritrade:
We have placed some restrictions on the following securities. These restrictions will not prevent clients from making basic buy and sell transactions. This list is as of January 29, 2021, 4:30PM ET. AMC, CVM, EXPR, FOSL, GME, NOK, BB, BBBY, FIZZ, GSX, IRBT, NCMI, TR, UONE, VIR, NAK, NAKD, DDS, KOSS The following restrictions are in place: Stocks - 100% holding requirement (not marginable), Long calls and puts are allowed, Covered call and short put orders may only be placed with a broker. Please be aware that wait times to speak with a broker may be longer than normal due to current market conditions. Covered calls only allowed if your account currently has the shares, Short puts only if you have the maintenance/cash to cover the entire exercise amount of the short puts, All other complex options orders will not be accepted
From Charles Schwab:
We believe these steps appropriately balance investors’ ability to trade these securities with the firm’s duty to protect itself from potentially absorbing losses incurred by an individual’s trading or investing strategies. They are consistent with our long-standing risk management practices and similar to steps we have taken with other high-risk or highly volatile securities in the past.
Communications from other brokerage firms share similar tones and messages. Within all these firms' customer trading agreements are similar stipulations that at the brokerage firm's discretion, they can limit or deny trades at any time. As diplomatic as these communications are, it seems convincing that losses or in some cases extraordinary losses did occur as a result of the speed and surprise that herd traders produced. As the days and weeks follow, word will likely travel just how bad the last week of January was for many brokerage firms. It is not often that brokerage firms go bust, and risk sharing is in important role of market continuity. Our decision to raise cash was not based on an overwhelming conviction that herd traders could bring down or significantly impact the financial system as we know it. That said, it remains to be seen how this will play out. What is obvious for now is that brokerage firms were forced to act to ensure their existence at the angst of an unpredictable market regime shift of herd traders.
Not A Conversation For Cocktail Hour
Near term crises averted, but little doubt that these firms did not suffer losses due to herd traders. This begs the question: Could social media or other forums create just enough frothiness at a pace so fast that it could overrun the most important house in the financial system, the central clearinghouse? The DTCC (Depository Trust and Clearing Corporation) is the central clearinghouse for most of the securities transactions in the U.S. The DTCC is a major component of the financial systems plumbing domestically and globally. Citing a 2013 white paper from the DTCC:
As the nature of systemic threats continues to change, industry participants need to understand these risks more clearly in order to be able to mitigate them. Those systemic threats that emerge quickly and without warning generally present a greater analytical challenge compared to risks that are more mature.
Additionally, within the 2013 DTCC whitepaper:
It is uncertain if a potential collateral shortage will materialize and, if it does, whether such a shortage will have systemic implications as some observers are predicting. DTCC will continue to closely engage with dealers, custodians, buy-side firms, regulators, and other service providers to assess the threats and recommend solutions that improve collateral processing. In addition, with respect to the settlement cycle initiative, DTCC will continue to document necessary behavioral changes, benefits and consequences to the end investor and educate industry constituents and gather input.
Rule 15c3-1, "Net Capital Rule" of the U.S. Securities and Exchange Commission (SEC), makes it mandatory for brokerages to maintain a minimum amount of prescribed capital in liquid form. It is hard to know just how strained certain member firms of the DTCC were or if it was just an anticipation of an impending strain by requiring member firms to boost their collateral with the DTCC (on 1/28/2021): A spokesman for the DTCC wouldn’t specify how much it required from particular firms but said that by the end of the day, industrywide collateral requirements jumped to $33.5 billion, up from $26 billion. This type of move does put strain either directly or indirectly within the financial system as raising capital/collateral requirements requires more borrowing and or sales of lower quality assets that don’t make the cut as qualifying collateral. It is believed that a large driver in the GameStop run-up in the last week of January was not driven by retail investors buying stock of GameStop, but rather brokerages having to hedge against the GameStop call options retail investors were purchasing. An afterthought for most individuals that think about securities trading is what is known as a settlement period. A settlement period usually is the day a security was bought or sold plus two days or T+2. Call options give the owner the right to buy an underlying security at a predefined price until the expiration date of the call option (American style). In order to buy a call option, someone has to be willing and able to sell a call option. As herds of investors buy call options, the brokerage firm has to mitigate their risk of the theoretical limitless upside potential for a short call option, which to do so often requires buying the underlying security. What happens during this T+2 window if a stock dramatically increases and then decreases so that when the time comes for the brokerage firm to deliver the net proceeds to cover the original higher purchase price is not enough to cover the lower share price? Other securities need to be sold and/or additional borrowing is required for that brokerage firm to meet their regulatory responsibilities as well as DTCC membership obligations. If this is not enough, and the member firm cannot access appropriate collateral, then the member firm becomes insolvent. Member firms of the clearinghouse share in the counterparty risk such that if one of the members becomes insolvent, the other member firms are there to post additional collateral and/or bail out the insolvent member firm.
Normal functioning markets create a relatively predictable environment for brokerage firms to calculate how much collateral they are likely needing to maintain. This main street versus wall street phenomenon creates an unpredictable environment for collateral requirements and in a worst-case scenario, may lead to member firms becoming insolvent. This seems very unlikely. No one thought (well almost no one) that Lehman Brothers would fail or that Russia’s default on their government bonds nearly created another financial crisis due to the massive leverage employed from Long Term Capital Management’s “Risk Free” arbitrage strategy. It seems far fetched that this could happen, but just the fear of this possibility could become self fulfilling or enough to rattle markets. The last week of January had so many other important events that, absent the movement from the herd traders, would have been the center of attention. It is difficult to tell if the last day of the month’s selloff was proactive risk management, fears that vaccines may not be effective against a new Covid variant, profit taking from the most recent market melt-up and asset valuations getting too far ahead of themselves or if there should be a real cause for concern of a systemic market contagion.
If you are reading this and overwhelmed by the charts, that is okay. The first chart is intended to show the pickup of trading activity at major brokerage firms, in a post zero-commission environment and at the onset of the Covid-19 Pandemic. The second chart accounts for where most of the U.S. equity market trades are facilitated and sources of liquidity. It is very challenging to know who is on the other side of your trade (if you sell a security, who is the buyer?). Market liquidity does not mean transparency, unless you’re a regulator with access to track all of the activity throughout U.S. markets in National Market System securities. The bottom chart is an illustrated summary of the major market participants that make up the financial markets. If you are reading this and do not know where you stand in the bottom right-hand chart, you are likely included in the “Retail Investors” category. All three charts sourced from Nasdaq Economic Research.
DISCLOSURE (Click links for sources. If in print, sources available upon request). Calculations & Definitions available upon request. See “Model Disclosure” page for important disclosures and information. Alternative Capitalis, LLC has not been endorsed and is not affiliated with Nasdaq Economic Research. Nasdaq Economic Research does not endorse the use of this information presented herein nor endorse Alternative Capitalis, LLC. Actual Data presented over varying periods. Views and opinions are of Alternative Capitalis, LLC and are not intended as investment advice or recommendation(s). Performance presented net of highest advisory fee. The results do not represent actual trading and actual results may significantly differ from the theoretical results presented. Past performance is no guarantee of future results.
When Your Neighbors Get Rich
Through month end, according to FactSet Earnings Insight, 82% of S&P 500 companies have reported positive fourth quarter earnings per share surprises, the second-highest percentage jump in reporting companies since FactSet began tracking the metric in 2008. The last three days of the month seemingly “priced in” these better-than-expected earnings, and mostly sold the news. There is a lot of conversation around bubble territory, and for good reason. Intrinsic value of a company is as close to the theoretical value as one can get…but there are many ways to come to this true value, and one individual’s used car might be another's lost treasure (in so much that there are differences of opinion based on the pleasure and value derived of the used car). These difference of opinions and uses are what form markets (not cars, per se).
The S&P 500 has been consistently trading above 20 times the 1 year forward consensus earnings estimates since May of 2020. A level not previously sustained since the dot.com bubble burst. Respected and legendary investor Jeremy Grantham has doubled down on his bubble call at the start of January. As Mr. Grantham says:
The real problem is in major bull markets that last for years. Long, slow-burning bull markets can spend many years above fair value and even two, three, or four years far above. These events can easily outlast the patience of most clients. And when price rises are very rapid, typically toward the end of a bull market, impatience is followed by anxiety and envy. As I like to say, there is nothing more supremely irritating than watching your neighbors get rich.
A clip of Keith Gill from January 22, 2021 on YouTube celebrating his value trade about 3 mins and 14 seconds into this SEVEN HOUR video (mind the language):
https://youtu.be/bmwx78rF1xo?t=194. Good for you, Keith. This is not an endorsement or a criticism. He did his homework last year, it’s well documented about his conviction, and well before this turned into a social phenomenon. It seems he recognizes that the value is no longer there. It’s better to be lucky than smart but it pays to be early over the long run. Initial reactions to this video will vary depending on where you sit. The beginning of the clip is more to highlight for some, Jeremy Grantham’s point (“nothing more supremely irritating than watching your neighbors get rich.”), and the “fun” trade turning into market excesses and froth. This is not intended to be reflective of Mr. Gill, but investor sentiment more generally. This is qualitative in nature, the assessment of sentiment that is.
Consumer and investor sentiment are actually not that bullish, which when they are have been reasonable contrarian indicators of a good time to hit the exit. Like any survey data, it depends who you ask and when you ask it. In the short-run, Mr. Grantham’s warnings carry some weight and even if over the short-term he is wrong (he has been early to make these calls in the past), valuations still do not appear attractive broadly speaking. More concerning is that it’s challenging to find just about anything not expensive at this point. When we look at corporate bond spreads, they are not only very narrow, but also the basis of that spread (Treasuries) is also very low nominally speaking. Our actions to raise cash while still targeting our Risk-On approach weightings conveys our views that we still believe we are in the early stages of an economic cycle, but asset prices are reflecting a much later stage of the economic cycle. Basic time value of money concepts tells us that the closer a cashflow is the more value it relates back to the present value, while the further out a cashflow, the less value it adds to the current value (with the sum of future cashflows equating to the present value of the asset). While better than expected earnings help justify prior valuations, the current value is always a product of what is anticipated ahead. Too much emphasis too far out, does not carry enough justification for the recent melt-up in our view. If we trade relatively sideways for a period, then we’ll of course be a little closer to those future cashflows and higher earnings putting return potential back into a historical market like return (hold) or better yet a relative pullback to lower prices to put cash back to work with the hopes of above market like returns (the “buy” conviction) either of which we are comfortable with. Most valuation models will point to bonds being more expensive than stocks, but these are just relative measures and does not mean both cannot be expensive at the same time. Dr. Ed Yardeni’s famous/controversial Fed’s Stock Valuation Model points to bonds still being relatively more expensive than stocks (This has been the case since the dot.com bubble, so no new news). Cash can be just as dangerous over the long run as individual securities due to inflation. Real return is based on how much more purchasing power you have once you have netted out the effects of inflation. Nominal returns are as advertised (how we present model returns and how most returns are presented) returns. A savings account earning 2% per year when inflation is also 2% means your real return is 0%, you likely cannot buy 2% more groceries in this hypothetical environment. Markets can stay overvalued for a longtime, but we believe there is enough near-term uncertainty on the horizon to wait for a reentry point.
DISCLOSURE (Click links for sources. If in print, sources available upon request). Calculations & Definitions available upon request. Measured by the Barclays US Aggregate Bond Index* - Morningstar. S&P 500 Total Return Index**. See “Model Disclosure” page for important disclosures and information. Views and opinions are of Alternative Capitalis, LLC and are not intended as investment advice or recommendation(s). Past performance is no guarantee of future results. Total Period Measured 12/31/2016 – 01/31/2021 for performance presentation .“Inception” refers to Inception to Date. Inception calculation assumes end of day market prices on 12/30/2016 for starting period values to calculate Inception to Date figures. Performance presented net of highest advisory fee. The results do not represent actual trading and actual results may significantly differ from the theoretical results presented. Past performance is no guarantee of future results.
Disclosure WARRANTIES & DISCLAIMERS
There are no warranties implied. Alternative Capitalis, LLC (“RIA Firm”) is a registered investment adviser located in Massachusetts. Alternative Capitalis, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Alternative Capitalis, LLC’s presentation is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Alternative Capitalis, LLC’s presentation should not be construed by any consumer and/or prospective client as Alternative Capitalis, LLC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the presentation. Any subsequent, direct communication by Alternative Capitalis, LLC with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Alternative Capitalis, LLC, please contact the state securities regulators for those states in which Alternative Capitalis, LLC maintains a registration filing. A copy of Alternative Capitalis, LLC’s current written disclosure statement discussing Alternative Capitalis, LLC’s business operations, services, and fees is available at the SEC’s investment adviser public information website – or from Alternative Capitalis, LLC upon written request. Alternative Capitalis, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Alternative Capitalis, LLC’s presentation or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. This presentation and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This presentation and information are not intended to provide investment, tax, or legal advice.
Alternative Capitalis, LLC is a registered investment adviser. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Model Performance Disclosure: The performance shown represents only the results of Alternative Capitalis, LLC’s model portfolios for the relevant time period and do not represent the results of actual trading of investor assets. Model portfolio performance is the result of the application of the Alternative Capitalis, LLC’s proprietary investment process. Model performance has inherent limitations. The results are theoretical and do not reflect any investor’s actual experience with owning, trading or managing an actual investment account. Thus, the performance shown does not reflect the impact that material economic and market factors had or might have had on decision making if actual investor money had been managed. Model portfolio performance is shown net of the model advisory fee of 1.25%, the highest fee charged by Alternative Capitalis, LLC. This reflects a change from Alternative Capitalis, LLC highest fee charged to a client(s) account from 1% to 1.25% annually. April 1, 2018 model performance to most recent date presented adjusts for the higher 1.25% annual fee. Model portfolio performance is shown net of the sample trading costs based on our Custodian’s, TD Ameritrade Institutional, trading costs. Performance does not reflect the deduction of other fees or expenses, including but not limited to brokerage fees, custodial fees and fees and expenses charged by mutual funds and other investment companies. Performance results shown include the reinvestment of dividends and interest on cash balances where applicable. The data used to calculate the model performance was obtained from sources deemed reliable and then organized and presented by Alternative Capitalis, LLC. The performance calculations have not been audited by any third party. Actual performance of client portfolios may differ materially due to the timing related to additional client deposits or withdrawals and the actual deployment and investment of a client portfolio, the reinvestment of dividends, the length of time various positions are held, the client’s objectives and restrictions, and fees and expenses incurred by any specific individual portfolio. The performance calculations are based on a hypothetical investment of $100,000 for both the model and benchmarks presented. On July 23, 2018, we corrected previously reported month end performance reports to account for transactions costs (trading fees) related to rebalancing model portfolios. The month end reports effected ranged from 2-28-2018 to 5-31-2018. Prior reports accounted for transaction costs related to trading fees. The four reports have been corrected and updated on Alternative Capitalis, LLC website (). 2-28-2018 had the largest variance in incorrect performance reported with an average of 9 BPs (“basis points”) (0.09% or 9/100 of 1.00%) of overstated positive performance in the models and ranged as high as 15 BPs to as low as 2 BPs. A comparison chart of the variances in reported performance can be provided upon request. Benchmarks: The performance results shown are compared to the performance of the performance of a blended ETF (exchange-traded-fund) portfolio comprised of the following two ETF’s symbols, SPY & AGG, are described below. The benchmarks used are investable ETFs and their performance calculation is inclusive of the highest fee charged to a client(s) account, 1.25% annually. This will reduce the total return of the investable benchmark by the annualized rate of 1.25%. The ETF symbol SPY (SPDR® S&P 500® ETF Trust) which seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index (the "Index"). Visit for more information about the ETF. The S&P 500® Index results do not reflect fees and expenses and you typically cannot invest in an index. The ETF symbol AGG (iShares Core U.S. Aggregate Bond ETF). The iShares Core U.S. Aggregate Bond ETF seeks to track the investment results of an index composed of the total U.S. investment-grade bond market. (the "Index"). Visit for more information about the ETF. The index composed of the total U.S. investment-grade bond market results do not reflect fees and expenses and you typically cannot invest in an index. The benchmark is blended representing a weighting of a percentage (%) to SPY and percentage (%) to AGG based on the respective model weights below. Unless otherwise indicated, the benchmarks are not rebalanced to maintain their original weighting over the period measured. Instead, they are comprised of the starting allocation and will shift given the prevailing market environment over the period measured. Return Comparison: To benchmark the results, the ETF (exchange-traded-fund) symbol SPY (SPDR® S&P 500® ETF Trust) which seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index (the "Index"). The S&P 500 was chosen as it is generally well recognized as an indicator or representation of the stock market in general and includes a cross section of equity holdings. In addition, the ETF symbol AGG was chosen as a benchmark. The iShares Core U.S. Aggregate Bond ETF seeks to track the investment results of an index composed of the total U.S. investment-grade bond market. The total U.S. investment-grade bond market was chosen as it is generally well recognized as an indicator or representation of the bond market in general and includes a cross section of debt holdings. For each respective model benchmark the performance measurement weightings are as follows to SPY / AGG %: 20/80, 30/70, 40/60, 50/50, 60/40, 70/30, 80/20, 90/10 % respectively for Ultra Conservative, Conservative, Moderate, Balanced, Growth & Income, Growth, Aggressive, Ultra Aggressive. OPTIONS TRADING RISK DISCLOSURE: Options Trading – Both the purchase and writing (selling) of options contracts –involves a significant degree of risk not suitable for all investors. Investors should carefully consider the inherent risks and financial obligations associated with options trading as further detailed in the Options Clearing Corporate booklet “Characteristics and Risks of Standardized Options.” 101 Federal Street, Suite 1956A, Boston, MA 02210 is Alternative Capitalis, LLC’s client facing address. All books, records, receipts, correspondence (mailing address) and day to day operations are located at 1565 West St, Wrentham, MA 02093.
Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. The results presented before 12/31/2016 for model performance assume that the weights initially held on that date were held at the unset of any performance presented before 12/31/2016. This assumes results based on discretionary models that are not purely quantitative or rules based. Global Benchmarks: The performance results shown are compared to the performance of the performance of a blended ETF (exchange-traded-fund) portfolio comprised of the following three ETF’s symbols, VT, BNDX & BND, are described below. The benchmarks used are investable ETFs and their performance calculation is inclusive of the highest fee charged to a client(s) account, 1.25% annually. This will reduce the total return of the investable benchmark by the annualized rate of 1.25%. Additionally, the ETF’s that lack the track record to cover the entirety of the period presented have been backfilled with index data that Alternative Capitalis, LLC deems appropriate as a proxy of the chosen ETF’s hypothetical track record. Below is the summary of backfilled data and time period:
The ETF symbol BNDX (Vanguard Total International Bond ETF). The Vanguard Total International Bond ETF attempts to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). Visit for more information about the ETF. The ETF symbol VT (Vanguard Total World Stock ETF) seeks to track the performance of the FTSE Global All Cap Index, which covers both well-established and still-developing markets. Visit for more information about the ETF. The ETF symbol BND (Vanguard Total Bond Market ETF). The Vanguard Total Bond Market ETF attempts to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index and attempted to track the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009. Visit for more information about the ETF. The benchmark is blended representing a weighting of a percentage (%) to BND, percentage (%) to VT and percentage (%) to BNDX based on the respective model weights below. Unless otherwise indicated, the benchmarks are not rebalanced to maintain their original weighting over the period measured. Instead, they are comprised of the starting allocation and will shift given the prevailing market environment over the period measured. Return Comparison: To benchmark the results, the ETF symbol BNDX (Vanguard Total International Bond ETF) attempts to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). The Vanguard Total International Bond ETF was chosen as it is generally well recognized as an indicator or representation of the global bond market, ex-U.S. bonds, and tracks an investment-grade, non-USD denominated bond index, hedged against currency fluctuations for U.S. investors. The ETF symbol VT (Vanguard Total World Stock ETF) seeks to track the performance of the FTSE Global All Cap Index, which covers both well-established and still-developing markets. The Vanguard Total World Stock ETF was chosen as it is generally well recognized as an indicator or representation of the global stock market and tracks a market-cap-weighted index of global stocks covering approximately 98% of the domestic and emerging market capitalization. The ETF symbol BND (Vanguard Total Bond Market ETF) attempts to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index and attempted to track the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009. The Vanguard Total Bond Market ETF was chosen as it is generally well recognized as an indicator or representation of the U.S. Domestic bond market, and tracks a broad, market-value-weighted index of U.S. dollar-denominated, investment-grade, taxable, fixed-income securities with maturities of at least one year. For each respective model benchmark the performance measurement weightings are as follows to BND/VT/BNDX %: 66/20/14, 57.8/30/12.3, 49.5/40/10.5, 41.2/50/8.8, 33/60/7, 24.7/70/5.3, 16.5/80/3.5 and 8.2/90/1.8 % respectively for the Ultra Conservative, Conservative, Moderate, Balanced, Growth & Income, Growth, Aggressive and Ultra Aggressive Global Benchmarks. DRAWDOWN ASSUMPTIONS: Domestic Benchmark -36.90%, Global Benchmark -41.00%, and Growth & Income Model -18.00% (see “Third Party Disclosures” page). Limitations of the assumptions include, but are not limited to, backfill index bias, time period bias and assume no changes to the model presented over the drawdown period. An advisory fee of 1.25% is also included in the calculation for the model and benchmarks over the drawdown period. Transaction fees for the model over the drawdown period are excluded as positions are assumed to be held constant. The benchmark drawdowns use the as calculated drawdowns over the periods measured from 10/9/2007 to 3/9/2009 for the domestic benchmark and from 10/31/2007 to 3/9/2009 for the global benchmark. The Growth & Income Model uses third party software to present a hypothetical drawdown in which calculations of the current holdings were not available during the drawdown period relative to the benchmark. There is no guarantee as to the accuracy of the third party drawdown assumptions nor should one draw any conclusions as to the accuracy and likelihood of the data presented. The Growth & Income Model drawdown assumption is based on a third party report dated September 24, 2018 (This report is available upon request).
The results do not represent actual trading and actual results may significantly differ from the theoretical results presented.