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PAS Tactical G&I Overview .pdf



Original filename: PAS - Tactical G&I Overview.pdf
Author: Samuel Rozzi

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Tactical Growth & Income
Product Holdings Overview
Total Equity Exposure: 24% of Portfolio
-We own equity for long-term growth potential and to protect investors’ purchasing
power against inflation.

International/Foreign Equity: 7% of Portfolio
-International exposure offers diversification into both developed and emerging markets,
which are often driven by different economic factors than the U.S. Emerging markets also
offer higher growth rates with substantially lower valuation multiples. Current valuations
in some emerging markets are near historic lows.
Individual Positions:
1. DNL—Wisdom Tree Global Ex-US Quality
-We like this low cost ETF because it gives us access to quality international growth
names with mid to large market capitalization. The ETF has a modest 12-month yield of
1.93%. Most holdings are in foreign developed markets but there is some emerging market
exposure. This holding provides solid growth potential and diversification from US equity.
2. PSAU/EKWAX—PowerShares Global Precious Metals ETF/Wells Fargo Precious Metals
-These holdings give you exposure to precious metals miners around the world. We are
bullish on gold and silver, in particular. We believe both are undervalued because of the
recent spike in the dollar and the introduction of negative interest rates around the world.
Precious metals have typically been a valuable diviersification tool because they tend to
have negative correlation to equity markets.
3. MDD—SRDR S&P International Mid-Cap
-This low cost ETF gives you exposure to non-US equities in developed countries with
market capitalizations between two and five billion dollars, an area that many broad based
funds do not take advantage of. This ETF offers solid growth potential and adds
diversification.

Tactical Growth & Income
US Equity: 17% of Portfolio
-Our U.S. equity positions are conservative, due to our view that the economy is slowing
and that valuation multiples are high, often a bad combination for long-term investment
returns. Our positioning is focused on a manager with excellent downside protection
capabilities, broad diversification, and a sector fund that is less economically sensitive than
the broader market.
Individual Positions:
1. ABCAX—American Beacon The London Co Income Equity Fund
-This income fund invests in mid to large capitalization income oriented US equities.
It has a 12-month yield of 1.43% and invests in companies with the goal of generating
income while also preserving capital. It has good downside capture and focuses on security
of principal primarily with growth coming second. This strategy is consistent with our
outlook.
2. VDC—Vanguard Consumer Staples ETF
-This is an ultra low cost consumer staples index ETF. It has a 12-month yield of
2.90%. The fund employs an indexing investment approach designed to track the
performance of the MSCI US Investable Market Index (IMI)/Consumer Staples 25/50, an
index made up of stocks of large, mid-size, and small U.S. companies within the consumer
staples sector. We find this sector attractive because of it’s defensive nature and high yield.
3. MLXIX–Catalyst MLP Infrastructure Fund Class I
-The fund seeks to achieve its investment objective by primarily investing in the
equity securities of the general partners of master limited partnerships ("MLPs") and the
parent companies of general partners of MLPs. This fund carries higher risk but we like it’s
11.09% 12-month yield. We feel that it compensates investors for the risk they’re taking.
Given the scarcity of yield available in global markets, this fund helps boost portfolio
income.

Tactical Growth & Income
Total Fixed Income Exposure: 41% of Portfolio
-We own fixed income products for interest income and capital preservation purposes.
Our portfolio consists of high credit quality holdings. Our risk lies more with changes in
interest rates than with the credit downgrades.
Individual Positions:
1. IEI—iShares 3-7 Year Treasury Bond
-This ETF invests in government treasury bonds with maturities ranging from three to
seven years. These treasury bonds are lower risk and provide solid income.
2. CRED—iShares Core U.S. Credit Bond
-This ultra low-cost ETF provides exposure to the broad U.S. credit market. It’s
portfolio contains investment grade corporate and noncorporate debt. This is a core bond
holding that provides income and capital preservation.
3. TLT– iShares 20+ Year Treasury Bond
-This low-cost ETF invests in treasury bonds with maturities greater than 20 years.
This is our most volatile fixed income holding, but it provides our bond portfolio with
increased income and a potential safe haven should market risks rise.
4. LQD—IShares iBoxx $ Investment Grade Corporate Bond
-This cheap ETF has a portfolio of investment grade corporate bonds. It has a
moderate credit risk and provides more yield than government bonds with the same
duration. It provides a good source of income.
5. MUB—iShares National AMT-Free Municipal Bond
-This low-cost ETF invests in federal tax free municipal bonds to provide income. This
ETF is used in larger accounts as those investors are likely to be in higher tax brackets.
6. VMBS—Vanguard Mortgage-Backed Securities ETF
-This ETF invests in mortgage-backed securities issued by U.S. government agencies,
such as Ginnie Mae, Freddie Mac, and Fannie Mae. This offers diversification within our
fixed income portfolio and offers solid income.

Tactical Growth & Income
Total Alternatives Exposure: 25% of Portfolio
-We own alternative holdings for downside protection, returns that are not correlated to
US equity markets through exposure to commodities, currencies, and foreign stock futures,
and for greater flexibility in volatile markets.
Individual Positions:
1. HFXIX—Catalyst Hedged Futures Strategy Fund Class I
-This fund uses financial derivatives such as equity index options to profit from volatility
in the S&P 500. This fund is attractive because it has low correlation, and sometimes
negative, to equity markets which offer the potential for provide downside protection.
2. VXX—iPath S&P 500 VIX ST Futures ETN
-The ETN trades short-term volatility instruments to profit from increases in S&P 500
option volatility. This fund is also used as a hedge against equity markets. It reduces our
overall risk and can increase returns in down markets.
3. LOTIX—LoCorr Market Trend Fund Class I
-This fund specializes in trading options. Most of the time, their options are positioned
bearish. This is used with our other alternatives to protect clients money and profit from
downturns.

Cash: 10% of Portfolio
-Our cash level is higher than normal because of the current uncertainty in the financial
markets. Our excess cash reserves provide the opportunity to finance new investment
opportunities, whenever they arise.


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