Investment Process

The market is not monolithic; over time, sectors, styles, and countries all come into and fall out of favor. There are leading parts of the market, and lagging components as well. Financial markets and all of their constituents rarely travel in linear fashion, but are usually volatile, chaotic, and changing.

CCAM starts with traditional Modern Portfolio Theory (MPT) techniques concerning risk and reward, but builds beyond this theory. MPT had its roots in the 1950s and isn’t as relevant in today’s marketplace as it once was. We believe that portfolio performance can be improved by realizing that diversification is not enough. Portfolio management should also attempt to minimize systemic (market wide) risk.

Diversification is still important, perhaps more important than ever. We can attempt to manage sector risk by holding multiple funds, overweighting strong sectors, and moving out of weak sectors. Asset class risk can be addressed by looking beyond just stocks to include bonds, commodities, and alternative asset classes. Last, but not least, managing systemic risk requires tactical considerations beyond a buy and hold allocation.

Placing a portion of your portfolio into our rotational investment approach has the potential to improve overall results over time. Our investment rotational methodology alters the weightings of the various market sectors, styles, and countries over the course of a multi-year economic and/or market cycle. We attempt to reduce risk by underweighting or eliminating exposure to those areas we consider to contain the most risk.

Understanding past market behavior usually helps investors prepare for time periods when the overall stock market is in a declining stage. Because some sectors, styles, and countries outperform the broad market averages, a tactical approach can minimize the downside and volatility inherent in a market in decline.