© 2019 Alternative Capitalis, LLC

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Market Update and Model Portfolio Reviews 7/31/2017

     In summary, the asset allocation models performed inline year to date as of 7/31/2017 when compared to their benchmarks. The model allocations have been positioned defensively year to date and we believe will remain defensively positioned for the foreseeable future. Equities have continued their bullish moves higher and have surpassed their mean annual returns through year to date. The risk off strategies are intended to outperform in modestly positive, flat and negative market environments. We are very satisfied that with such a tailwind for global equities through the year, the models have kept pace with their benchmarks.

Our bias toward international exposures created strong relative returns when compared to domestic assets.  Our unhedged sovereign debt allocation outperformed the domestic large cap blend benchmark (we do not expect this to persist).  The reason behind the allocation to unhedged sovereign debt was the fact the strength of the U.S. dollar compared to other currencies had increased for too long and too far in our opinion.  The dollar fell in value on a trade weighted bases throughout the year which helped drive return for non-U.S. sovereign bonds.  Two of our top three performers were in the closed end fund space notching out returns of 24.6% and 17.3% respectively.  After a remarkable year in 2016 for small cap equities, 2017 has been anything but that.  On a go forward basis, we believe that small cap equities will return to their historical type returns and likely lead the way for the second half of the year so long as the economy stays strong domestically.  We continue to carefully monitor our exposure to interest rate sensitivity.   Remember, as interest rates rise, bond prices fall.  When interest rates are as low as they are now, bond prices are even more sensitive to rising interest rates than they would if interest rates were higher. 


We are always scrutinizing our investments and capital market expectations.  We view the biggest risk to our Risk-Off Strategies are that if we are in the middle of what’s known as a secular bull market (a very looooong bull market with corrections of 10-20% along the way).  As mentioned, the Risk-Off Strategies are intended to outperform their benchmarks in a modestly positive, flat and negative market environment.  If our forecast is wrong than we will underperform our benchmark.  Put differently, we also have a Risk-On Strategy as well as a market neutral strategy.  The Risk-On Strategies are intended to outperform in a Bull Market.  Please see the below commentary and chart to view our Growth & Income Risk Off Strategy. 

Our bias toward international exposures created strong relative returns when compared to domestic assets.  Our unhedged sovereign debt allocation outperformed the domestic large cap blend benchmark (we do not expect this to persist).  The reason behind the allocation to unhedged sovereign debt was the fact the strength of the U.S. dollar compared to other currencies had increased for too long and too far in our opinion.  The dollar fell in value on a trade weighted bases throughout the year which helped drive return for non-U.S. sovereign bonds.  Two of our top three performers were in the closed end fund space notching out returns of 24.6% and 17.3% respectively.  After a remarkable year in 2016 for small cap equities, 2017 has been anything but that.  On a go forward basis, we believe that small cap equities will return to their historical type returns and likely lead the way for the second half of the year so long as the economy stays strong domestically.  We continue to carefully monitor our exposure to interest rate sensitivity.   Remember, as interest rates rise, bond prices fall.  When interest rates are as low as they are now, bond prices are even more sensitive to rising interest rates than they would if interest rates were higher. 


We are always scrutinizing our investments and capital market expectations.  We view the biggest risk to our Risk-Off Strategies are that if we are in the middle of what’s known as a secular bull market (a very looooong bull market with corrections of 10-20% along the way).  As mentioned, the Risk-Off Strategies are intended to outperform their benchmarks in a modestly positive, flat and negative market environment.  If our forecast is wrong than we will underperform our benchmark.  Put differently, we also have a Risk-On Strategy as well as a market neutral strategy.  The Risk-On Strategies are intended to outperform in a Bull Market.  Please see the below commentary and chart to view our Growth & Income Risk Off Strategy. 

See “Model Disclosure” page for important disclosures and information – Period Measured 12/30/2016 – 7/31/2017. Model Performance presented net of highest advisory fee and trading costs.

Disclosure WARRANTIES & DISCLAIMERS There are no warranties implied. Alternative Capitalis, LLC (“RIA Firm”) is a registered investment adviser located in Chelsea, 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 – www.adviserinfo.sec.gov 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.

Model Disclosure

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%, the highest fee charged by Alternative Capitalis, LLC and 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.  Benchmarks: The Growth & Income 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 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 https://us.spdrs.com/en/etf/spdr-sp-500-etf-SPY 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 https://www.ishares.com/us/products/239458/ishares-core-total-us-bond-market-etf 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 sixty (60%) percent to SPY and forty (40%) to AGG.  Unless otherwise indicated, the benchmarks are not rebalanced to maintain their original weighting.  Instead, they are comprised of the starting allocation and will shift given the prevailing market environment over the period measured.  Return Comparison: Explanation of why benchmark was chosen.  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.

 
The results do not represent actual trading and actual results may significantly differ from the theoretical results presented.