Approved for Client Use
- Standard & Poor’s 500 (S&P 500) Index rose 8.93% during the quarter, and it was up 15.15% over the past twelve months.
- MSCI All Country World ex-US Index (international stocks) increased less than U.S. stocks, with the index up 8.30% in the quarter and 11.00% over the past twelve months.
- MSCI Emerging Markets Equities Index was up 9.56% for the quarter and 10.54% over the past twelve months.
- Bloomberg Barclays U.S. Aggregate Bond Index underperformed stocks by rising 0.62% during the quarter. The index rose 6.98% over the past twelve months.
- Bloomberg Barclays 1-3 Year Government Bond Index rose 0.23% in the quarter and 3.73% over the past twelve months.
- Rogers International Commodities Index increased by 8.35% for the quarter and was down 13.99% over the past twelve months.
- Gold underperformed the broad commodity markets for the quarter, rising 6.72%. However, over the last 12 months, it continued to outperform stocks, bonds, and commodities, up 27.04%.
iSectors Allocation Model Commentary
iSectors Post-MPT Allocations
- The iSectors Post-MPT Growth and Moderate Allocations underperformed their respective benchmarks for the third quarter of 2020, with Post-MPT Growth rising 1.36% versus the S&P 500, which was up 8.93% and Post-MPT Moderate up 1.04% versus its 60/40 stock/bond benchmark, which was up 5.64% (60/40 = 60% S&P 500 and 40% Barclays U.S. Aggregate Bond Index.)
- Post-MPT Growth is up 5.16% over the past twelve months, underperforming its S&P 500 benchmark, which is up 15.15% over the past twelve months.
- Post-MPT Moderate rose by 4.56% over the past twelve months, underperforming its 60/40 stock/bond benchmark, which was up 12.50%
- With over 15 years of real-time performance, iSectors Post-MPT Growth has outperformed the S&P 500 index, since its 2005 inception, with less drawdown. Historically, Post-MPT Growth and Moderate tend to outperform the S&P 500 index when the S&P 500 index’s returns are growing at an annualized rate of less than 10%,and when the S&P 500’s returns are negative.
- During the quarter, iSectors Post-MPT Growth and Moderate were both positively impacted by the utility index funds. Gold mining index funds also added to Post-MPT Growth’s results. Technology index funds reduced returns in both allocations.
- During the quarter, iSectors Post-MPT Growth and Moderate both bought technology index funds while selling utility index funds. At the same time, Growth sold gold mining holdings while Moderate sold real estate securities. Both models seem positioned for a recessionary economic environment
iSectors Domestic Equity Allocation
- The Domestic Equity Allocation was up 6.64% for the quarter. Over the past 12 months, the strategy increased by 4.51%, underperforming the S&P 500.
- Large-cap Growth and growing dividend securities posted the best results in the quarter.
- The fundamentally weighted Domestic Equity Allocation focuses on companies withless volatility and a history of increasing dividend payments for many consecutive years. These companies see demand by investors in the face of increased market volatility and lower interest rates. The portfolio’s current dividend yield is 2.54%.
iSectors Domestic Fixed Income Allocation
- The Domestic Fixed Income Allocation was up 1.26% for the quarter and increased 1.83% over the past twelve months.
- High yield funds outperformed investment-grade funds during the quarter as yield spreads to Treasuries declined further in high yield bond funds.
- With an effective duration of approximately 1.5 years and an average investment-grade rating, Domestic Fixed Income seeks to provide investors attractive income (current yield of 3.14%) while experiencing low principal volatility.
iSectors Enhanced Allocations
- The Enhanced Balanced Allocation increased by 3.37% compared to the Morningstar Moderate Target Risk benchmark rise of 4.80% in the quarter. For the 12-month period, Enhanced Balanced was up 3.45% while the moderate risk benchmark rose 7.69%.
- The Allocations’ best investments in the quarter were large-cap Growth and gold mining stocks. Technology results were the worst.
- The Enhanced Allocation series (Income, Conservative, Balanced, Growth, and Aggressive) blends sophisticated short-term laddered bonds, a fundamental Equity strategy (focused on owning stocks that have increased their dividends for many consecutive years), and a 20% satellite allocation to iSectors’ dynamic Post-MPT Growth.
iSectors Global Allocations
- Third-quarter returns for the Global Allocations ranged from 1.94% for Global Fixed Income to 6.86% for Global Equity.
- S. large-cap growth and growing dividend funds were the most significant positive contributor to the quarter’s performance for the Global Equity Allocation. U.S. mid and small-cap dividend and international dividend funds underperformed.
- The Global Fixed Income Allocation was positively impacted by senior loan and global high yield funds in the quarter. Short-term Treasury and investment-grade funds underperformed.
iSectors Liquid Alternatives Allocation
- The Liquid Alternatives Allocation rose 4.02% during the quarter and 1.79% over the past twelve months.
- The portfolio’s allocations to alternative equity and precious metals funds contributed the most to its positive returns. Hedged equity funds and energy master limited partnerships hurt performance during the quarter.
- The Liquid Alternatives Allocation has outperformed its HFR hedge fund benchmark over the last 3, 5, and 10 years.
iSectors Endowment Allocation
- The Endowment Allocation’s total return was up 1.85% for the quarter and was down 11.09% over the past twelve months.
- The Endowment Allocation’s international small-cap and U.S. dividend funds were the best performing allocations in the quarter. Energy master limited partnership holdings hurt the strategy.
- The Endowment Allocation targets clients with a goal of current income rather than total return. It is diversified among 16 equity, fixed income, and alternative funds that have low to moderate correlations and equity and fixed income markets. The allocation’s current yield is 6.76%.
iSectors Inflation Protection Allocation and iSectors Precious Metals Allocation
- The Inflation Protection Allocation increased 6.00% while the Precious Metals Allocation rose 12.05% during the quarter. Over the past twelve months, Inflation Protection was up 7.80%, significantly ahead of the Rogers Commodity Index benchmark. Precious Metals has had a gain of 28.28% over the past 12 months. Precious Metals has been the best performing iSectors Allocation over the past 3 and 12 month periods.
- Surging silver prices positively impacted Precious Metals. In addition to broad commodity holdings, the Inflation Protection Allocation model was significantly helped by rising silver bullion funds.
- Easy money policies currently being promoted by many Central Banks worldwide will have long-term severe inflationary effects on our economy. We believe inflation and higher interest rates will be the most significant risk factors investors will face over the next 20 years. The recovery in precious metals prices may be an initial indication that this process has begun. Investors would be wise to place a portion of their portfolios in inflation-protected assets, particularly precious metals, to hedge against the possibility of inflation and the potential decline in the value of the dollar.
iSectors Capital Preservation Allocation
- The Capital Preservation Allocation was up 0.82% for the quarter and increased by 2.00% over the past 12 months. The model has outperformed the Barclays 1-3 Year Government Bond benchmark since its January 2010 inception.
- The Capital Preservation Allocation has a current yield of 2.26% with an effective duration of 1.0 years and an average investment-grade rating.
- The Capital Preservation Allocation offers a cash alternative with short durations to preserve investment principal in an economic environment characterized by volatile interest rates. It also provides the potential for enhanced returns versus money market funds while maintaining liquidity in the current low-interest-rate environment.
iSectors Tactical Global Balanced Allocation
- The Tactical Global Balanced Allocation rose 1.94% during the quarter. It is up 3.63% over the past year.
- Gold and U.S. large-cap equity holdings led results. Poorly timed investments in broad commodity funds underperformed in the quarter.
- Currently, the Tactical Global Balanced Allocation is invested in U.S. large-cap equities, international equities, emerging market equities, gold, and bonds. It holds a 35% cash equivalent position.
All model returns presented gross of fees. Index comparisons are provided for information purposes. You cannot invest directly in an index, only in index funds that charge fees.
iSectors® is a series of proprietary asset allocation models and services. iSectors, LLC is an affiliate of Sumnicht & Associates, LLC (Sumnicht), and, as such, iSectors and Sumnicht share certain employees’ services. iSectors became registered as an investment advisor in August 2008. iSectors allocation models are only available through registered investment advisors as separately managed accounts (SMAs) or unified managed accounts (UMAs). iSectors® is a registered trademark of Sumnicht Holdings, LLC.
The contents of this presentation are for informational purposes only. Content should not be construed as financial or investment advice on any subject matter. This is neither an offer nor a solicitation to buy and/or sell securities. Information pertaining to iSectors’ advisory operations, services, and fees is set forth in its current disclosure statement (Form ADV, Part 2 Brochure), a copy of which is available upon request.
iSectors’ allocation models are not guaranteed and involve risk of loss. At any given point in time, the value of iSectors allocation model portfolios may be worth more or less than the amount invested. Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investments and/or investment strategies devised or undertaken by iSectors) will be either suitable or profitable for a client’s or prospective client’s portfolio.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance will be profitable or equal, either the performance results reflected or any corresponding historical index. Asset allocation and diversification concepts do not ensure a profit nor protect against loss in a declining market.
The historical benchmark index performance results are provided exclusively for comparison purposes to assist an individual client in determining whether the performance of a specific investment meets the client’s investment objective(s). It should not be assumed that any account holdings will correspond directly to any comparative index. Index performance results do not reflect the impact of taxes. Indexes are not available for direct investment. Index performance results are compiled directly by each respective index and obtained by iSectors from reliable sources. Index performance has not been independently verified by iSectors.
iSectors models are based on index ETFs that can neither outperform nor underperform their benchmark index. We provide benchmark indexes that are well known for comparison purposes only.
Composite performance results reflect the reinvestment of dividends and other account earnings and do not reflect the impact of taxes. Composite performance results provided are gross of all management, platform, advisory and custodial fees. iSectors investment allocation models are only available through registered investment advisors as SMAs or UMAs, who will charge an additional fee for their advisory services. For information about the fees that pertain to a clients’ accounts, check with your platform provider. For reasons including size of the account, platform provider and custodian utilized, as well as variances in portfolio account holdings, market fluctuation, the date on which a client engaged iSectors’ services, regular model rebalancing and/or updates, and timing of account contributions and withdrawals, the underlying fees and performance of a specific client’s account may vary from other accounts. ERISA (group retirement) accounts may be subject to additional recordkeeping and/or administrative fees.
This information is marketed to investment professionals. iSectors®, LLC has managed these 15 allocations since the firm’s inception in 2008. Previously, Sumnicht & Associates, LLC (Sumnicht), an affiliated company, managed the allocations. Sumnicht is a provider of investment management services for institutional, family office, and individual clients. Sumnicht claims compliance with the Global Investment Performance Standards (GIPS®). Sumnicht claims that the allocations are GIPS compliant since each allocation’s respective inception dates and have been GIPS verified from 1/1/2008 to 12/31/2019, as of the verification date of 6/26/2020. The allocation composites include both institutional and individual client accounts, whereby iSectors has sole portfolio discretion with investment objectives matching that of each specific allocation. Performance in this publication is shown in U.S. dollars, gross of fees, including the reinvestment of dividends and, do not reflect the impact of taxes. Returns will be reduced by investment manager, platform, custodial, trading, and advisory fees, if applicable. Past performance is not indicative of future results. To obtain a compliant presentation and a list and description of the firm’s composites, please contact Chuck Self, CIO, at (920) 257-5168 or [email protected].
You should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from an investment professional.
This presentation has not been reviewed, submitted for review before, or otherwise approved by FINRA, the SEC or any state or provincial securities regulators.
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