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Slide 1 of 30
The ISA Advantage
A commitment to active risk management and a global pursuit of index-linked returns across the asset spectrum underpins an investment philosophy that is the hallmark of the Index Strategy Advisors advantage.
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Slide 2 of 30
1. Dynamic Asset Allocation Makes a Difference
Our disciplined approach helps to avoid performance impairing volatility.
Our focus on asset allocation is dynamic and based
on a quantitative framework that continually
analyzes the unique catalysts and drivers of
performance for each investment sector. Given the
general efficiency of the capital markets, we
exclude all stocks from investment consideration.
Our 100% index-focused approach combines
opportunistic tactical investing by identifying index-
linked asset classes, where relative over- and
under-valuation exist, with strategic and
incremental investing in sectors expected to
outperform over longer periods of time.
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Slide 3 of 30
1. Dynamic Asset Allocation Makes a Difference: ISA vs. Traditional Managers
Compare ISA to traditional investment manages to see how we're different.
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Slide 4 of 30
2. Rigorous Research
We are focused on furthering understanding of the drivers of risk and opportunity in the New Era of investing.
The foundation of our research is a
powerful algorithm library. Our research
methods are at the forefront of
technology, adaptive, and based on the
new realities of extremely volatile and
intricately interconnected global
financial markets.
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Slide 5 of 30
2. Rigorous Research
Global awareness is critical to measure and understand the true scope of risk.
With the development in
the liberalization of capital
movements and the
securitization of stock
markets, international
financial markets have
become increasingly
interdependent. ISA
algorithms perform
surveillance on global
markets 24 hours a day, 7
days per week.
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Slide 6 of 30
2. Rigorous Research
Global awareness is critical to measure and understand the true scope of risk.
With the development in
the liberalization of capital
movements and the
securitization of stock
markets, international
financial markets have
become increasingly
interdependent. ISA
algorithms perform
surveillance on global
markets 24 hours a day, 7
days per week.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
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Slide 7 of 30
2. Rigorous Research
For the first time in over 70 years, 2000-2010 challenged investor expectations of "normal returns.”
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Slide 8 of 30
2. Rigorous Research
For the first time in over 70 years, 2000-2010 challenged investor expectations of "normal returns.”
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 9 of 30
2. Rigorous Research
Relative to prior post-correction rallies, the current recovery is robust.
Though immensely disruptive across all
global markets, the financial crisis has
passed. In capital market terms, the
global markets have recovered and shown
tremendous resilience compared to prior
recession recoveries. ISA is committed to
identifying the sectors and regions which
will lead the recovery and advance into
the next decade. Compared with prior
recoveries, the current rebound ranks
among the strongest.
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Slide 10 of 30
2. Rigorous Research
Looking forward, experts disagree on the range of potential returns.
The range of global stock market
returns is not obvious and
underscores our focus on analyzing
the real drivers of opportunity and
risk. In the current post-crisis
environment, we believe that an
investment manager’s best strategy
for generating sustainable returns is
to manage client portfolios more
actively and switch between assets
and asset classes when necessary or
opportune, according to where the
risks are lowest or the potential
returns most attractive.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 11 of 30
3. Global Diversification & Asset Allocation
ISA portfolios are constructed and managed with carefully screened, index-linked ETF securities.
Investment portfolios should be built around a
strategic and long-term approach. However, as
markets fluctuate and risks and opportunities
emerge, sometimes dramatically, it is prudent to
account for them when establishing an asset
allocation policy. Through global diversification
and dynamic asset allocation, ISA portfolios are
designed to help investors navigate significant,
unstable movements in financial markets,
following a path to potentially increased returns,
all while managing risks through a disciplined
process.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 12 of 30
3. Global Diversification & Asset Allocation
ISA monitors international conditions where emerging markets are playing a much larger role in the global economy.
The developed markets generally
have greater exposure to emerging
markets than at anytime previously.
We believe that a longer-term
consequence may be higher volatility
in investment portfolios, given that
emerging-market economies tend to
be more volatile than mature
economies.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 13 of 30
3. Global Diversification & Asset Allocation
ISA monitors international conditions where emerging markets are playing a much larger role in the global economy.
The developed markets generally
have greater exposure to emerging
markets than at anytime previously.
We believe that a longer-term
consequence may be higher volatility
in investment portfolios, given that
emerging-market economies tend to
be more volatile than mature
economies.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
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Slide 14 of 30
3. Global Diversification & Asset Allocation
ISA monitors international conditions where emerging markets are playing a much larger role in the global economy.
The developed markets generally
have greater exposure to emerging
markets than at anytime previously.
We believe that a longer-term
consequence may be higher volatility
in investment portfolios, given that
emerging-market economies tend to
be more volatile than mature
economies.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 15 of 30
3. Global Diversification & Asset Allocation
ISA monitors international conditions where emerging markets are playing a much larger role in the global economy.
The developed markets generally
have greater exposure to emerging
markets than at anytime previously.
We believe that a longer-term
consequence may be higher volatility
in investment portfolios, given that
emerging-market economies tend to
be more volatile than mature
economies.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 16 of 30
4. A Disciplined Investment Process
The ISA investing process integrates protection and growth objectives.
The ISA investment process achieves
growth and protection and is built on a
three step process: Downside Risk
Management, Portfolio Optimization, and
Compound Growth. The achievement of
these three areas of focus is possible
because of the integration of the
components within each objective: Capital
Preservation, Situational Logic, Multifactor
Risk Management, and Enhanced Return
each blend functionality with the larger
objectives.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
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Slide 17 of 30
4. A Disciplined Investment Process: Downside Risk Management
Capital Preservation: A two-decade pattern of low volatility has been broken.
Today's markets, coupled with the
economic information within them, move
faster than any other time in history. These
movements are both volatile and
correlated. Co-movements across
international economies and asset classes
are exacerbated by excess volatility,
exposing
portfolio holdings to risk at greater levels
than ever before. Not only have the rules of
investing changed, but the tools necessary
to manage an investment portfolio have
changed forever as well.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
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Slide 18 of 30
4. A Disciplined Investment Process: Downside Risk Management
Capital Preservation: A two-decade pattern of low volatility has been broken.
Today's markets, coupled with the
economic information within them, move
faster than any other time in history. These
movements are both volatile and
correlated. Co-movements across
international economies and asset classes
are exacerbated by excess volatility,
exposing
portfolio holdings to risk at greater levels
than ever before. Not only have the rules of
investing changed, but the tools necessary
to manage an investment portfolio have
changed forever as well.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 19 of 30
4. A Disciplined Investment Process: Downside Risk Management
Capital Preservation: A two-decade pattern of low volatility has been broken.
Today's markets, coupled with the
economic information within them, move
faster than any other time in history. These
movements are both volatile and
correlated. Co-movements across
international economies and asset classes
are exacerbated by excess volatility,
exposing
portfolio holdings to risk at greater levels
than ever before. Not only have the rules of
investing changed, but the tools necessary
to manage an investment portfolio have
changed forever as well.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 20 of 30
4. A Disciplined Investment Process: Downside Risk Management
Capital Preservation: A two-decade pattern of low volatility has been broken.
Today's markets, coupled with the
economic information within them, move
faster than any other time in history. These
movements are both volatile and
correlated. Co-movements across
international economies and asset classes
are exacerbated by excess volatility,
exposing
portfolio holdings to risk at greater levels
than ever before. Not only have the rules of
investing changed, but the tools necessary
to manage an investment portfolio have
changed forever as well.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 21 of 30
4. A Disciplined Investment Process: Downside Risk Management
Capital Preservation: The difficulty of recovering losses makes capital preservation a priority.
The timing of corrections, market shocks,
price dislocations, and other macro events
may be impossible to predict; but are
persistent in their recurrence. Such events
reveal massive data, that in our view,
inform a statistically meaningful risk-
reward trade-off assessment in portfolio
allocations. We introduce a level of
downside risk
management through dynamic asset
allocation based on these data, events and
or specific market conditions that reflect
the optimal risk/reward balance for the
expected returns of portfolio holdings.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 22 of 30
4. A Disciplined Investment Process: Downside Risk Management
ISA employs situational logic to inform a prudent response to market shocks.
Every market correction is unique, or unique enough that many investors are unprepared when
the market turns. We leverage historical risk factor interactions which translate to the present,
and monitor the strongest factor interactions within these pairings for objective confirmation of
a downtrend. As our market assessment improves or deteriorates, risk is reduced or assumed
accordingly.
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Slide 23 of 30
4. A Disciplined Investment Process: Downside Risk Management
Situational Logic: ISA portfolios are managed for each client's needs and situation.
ISA algorithms locate information to determine how price trends may occur and the magnitude
of their consequences amid a constantly evolving investment environment; however, algorithms
do not make investment decisions. We integrate human temporal logic by intellectually
exploring the full space of possible outcomes for a given situation and sequence, fully
considering the breadth of pitfalls or opportunities inherent to the present environment and
client situation.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 24 of 30
4. A Disciplined Investment Process: Downside Risk Management
Multifactor Risk Management: Macro risk factor exposure by ISA portfolios reflect multiple dimensions of risk.
Differences in market exposures to compensated
risk factors largely explain the returns between
investors. By applying multi-dimensional regression
analysis, ISA algorithms can analyze which
market/macro asset classes the portfolios are most
exposed to (e.g. oil, commodities, interest rates,
currencies, other financial markets, industry
sectors, etc.) and weigh heaviest in influencing
risk. Risk factor analysis calculates the exposure to
a provided set of parameters, while risk factor
screening finds the parameters that best describe
the portfolio
performance.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 25 of 30
4. A Disciplined Investment Process: Downside Risk Management
Beta Factoring: Keen awareness of co-movement levels increases risk management effectiveness.
No investment program can predict or control the direction of the markets. Achievement of outstanding returns is predicated on what is within investors’ reach. Beta refers to an inherent sensitivity to the Large Cap U.S. Equity Markets. Since equity market movements are generally recognized to represent ‘beta’, beta factoring describes the process for determining which securities move in tandem with equities and to what degree a specified investment may exceed the performance (or underperformance) of a specific index (e.g. S&P 500). When powerful trends unfold, selection of investments based on beta factor can provide correlated, yet excess performance of a given benchmark. Appraisal of beta and beta drift for all ISA investment candidates serves as a measure of vulnerability to equity, volatility, and scoring of the potential magnitude of expected returns. For this reason, the vast new supply of sector, regional, and commodity ETFs have enhanced return potential for ISA clients so excess market returns and improved risk management are newly within reach.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 26 of 30
4. A Disciplined Investment Process: Downside Risk Management
ISA risk factors support real-time data-driven analysis.
To be useful, a risk model must be effective at identifying important interactions between risk
factors. ISA risk analyses calculate a set of traditional market risk measures on overall portfolios as
well as drill down into asset classes, security types, regions/countries, sectors, individual securities
and the interactions among them. The calculations involve advanced mathematical models that
adapt to the current trading environment.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
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Slide 27 of 30
4. A Disciplined Investment Process: Downside Risk Management
Efficient cost containment generates enhanced return.
ISA employs a two tiered trading structure to execute orders for client portfolios: Commission-Free
Window Trading, and Real-Time Market Trading with direct links to major trading venues.
Our most cost-effective trading method is a patented, commission-free window trading system. Our window trades are an innovative way to fill
orders efficiently for long term investors. Instead of being executed immediately, window trades are grouped together twice a day for
execution, matched internally when possible, and any remaining orders are then sent to the market. Our commission-free window trading
system saves our clients time and money with advantages that include:
• Ability to buy and sell an entire portfolio in a single transaction.
• Unlimited trades with no commissions, no transaction fees, and no ticket charges.
• The ease of placing orders in dollar amounts rather than shares.
• Capability of buying and selling whole or fractional shares.
Window Trading
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Slide 28 of 30
4. A Disciplined Investment Process: Downside Risk Management
Efficient cost containment generates enhanced return.
ISA employs a two tiered trading structure to execute orders for client portfolios: Commission-Free
Window Trading, and Real-Time Market Trading with direct links to major trading venues.
Real-Time Trading
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 29 of 30
4. A Disciplined Investment Process: Downside Risk Management
Unlike traditional investment strategies, Global Macro returns depend mostly on manager decisions.
Academic research and real world
performance results show that, in large and
efficient markets, the selection of individual
stocks does not reliably produce superior
uncorrelated returns. For these reasons, we
do not attempt to select individual stocks;
instead, we utilize asset class allocation
strategies to construct and manage broadly
diversified index linked portfolios. This
process is also categorized as a global
macro approach. Our skill, augmented by
our rigorous research, reflects investment
decisions that directly impact returns for
client portfolios.
© COPYRIGHT 2011 INDEX STRATEGY ADVISORS, INC. ALL RIGHTS RESERVED
Expert investing advice. World-class investment research. FOR MORE INFORMATION PLEASE VISIT - WWW.INDEXSTRATEGYADVISORS.COM
CALL 1-800-984-0268 TO SPEAK WITH AN INVESTMENT ADVISOR
Slide 30 of 30
To learn more about how our investment capabilities can help you, please make an appointment by selecting:
TALK AN ADVISOR
at
www.indexstrategyadvisors.com
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