Update: Post-MPT Growth Allocation 10 year data results through July 2015

By Chief Investment Officer, Chuck Self , and Director of Business Development, Scott Jones on August 19, 2015

Among the many ways to graphically review performance and risk numbers, presenting this information in triangle forms can give unique perspectives.  In November of last year, we wrote on Post-MPT Growth Allocation data through January 2014.  In this post, we present updated results for the ten years ending July 2015.

The tables (below) give you risk or return numbers over annual intervals since inception.  Each interval begins on 8/1 for the year indicated across the top of the chart and ends on 7/31 for the year shown along the side of the chart.  Thus, in the Annual Rate of Return table (Chart 1), the return from 8/1/2006 to 7/31/2014 was 9.0% on an annual basis.  These different interval numbers can:

• Give varying insights into future values
• Raise questions on when the strategy exceeds or fall behind expectations
• Provide perspective on how the long-term risk and return numbers develop

Looking at the Annual Rate of Return table, the numbers in the hypotenuse of the triangle are the Allocation’s gross rates of return for 12 month periods (fiscal years ending 7/31.)  The next diagonal to the left represents all of the numbers for one additional year period of time.  Thus, the diagonal starting with 10.4% and ending with 13.8% represents all of the two-year performance numbers annualized. The number at the lower left corner (9.3%) is the nine-year number ending 7/31/2015.

Although the points that can be made from these charts are endless, some of the most interesting are:

• Annual Rate of Return Chart (Chart 1)
  o   Every four-year or greater period presented has positive returns during a time including the greatest recession since the 1930s
  o   At six-year periods and longer, all of the returns are between 7% and 11%

• Annual Rate of Return Minus Those of the S&P 500 (Chart 2)
  o   Every six-year or greater period shows Post-MPT Growth outperforming the S&P 500
  o   Over long periods of time, it is  not unreasonable to expect the strategy to outperform the S&P 500 by 1.5 to 2.5 percentage points

• Annualized Standard Deviations (Chart 3)
  o   Every three-year or greater period has a standard deviation under 20%
  o   Over long periods of time, the standard deviation should be in the 14% to 15% range comparable with that of the S&P 500 (the standard deviation for the S&P 500 during the ten years ending 7/31/2014 was 14.7%)

• Correlation of the Allocation’s Returns With Those of the S&P 500 (Chart 4)
  o   Although the correlations vary widely in one-year periods, they settle in the 0.55 – 0.60 range over longer periods of time
  o   As we would expect, the strategy is mildly correlated with the stock market.  But to outperform the S&P 500 with similar levels of risk and moderate correlation makes the Allocation an attractive addition to or substitute for traditional equity strategies in client portfolios

Although past performance may not indicate future results, Post-MPT Allocation has met its goal of outperforming the S&P 500 with lower drawdown and only moderate correlation to equities.

Please contact Scott Jones at 800.869.5184 to learn how to invest in the Post-MPT Allocation.