STRATEGY

Choppy waters? Or smooth sailing? Fairlead funds seek to withstand any market environment.

Fairlead Strategies employs a systematic approach to technical analysis focused on the identification of important trends and support & resistance levels. Our mathematically based tools facilitate tactical market timing and positioning. Our discipline adheres to three categories of indicators: trend-following, overbought/oversold, and relative strength. We believe top-down influences are very strong in the U.S. equity market, making it essential to identify trends at the market and sector level to succeed in investing. For TACK, Fairlead Strategies has developed a sophisticated proprietary technical model that leverages sector leadership in the U.S. equity market, while managing through downdrafts by incorporating exposure to other asset classes, including Treasuries, gold, and cash.

Technical Indicator Toolbox

Identify Sector Leadership

Review Overall Market Risk Environment

Tilt Portfolio For Risk-On & Risk-Off

Fairlead Strategies Methodology

  • TACK is a model-driven exchange-traded fund aligned with Fairlead Strategies disciplined technical methodology with a discretionary overlay reserved for market anomalies. The basis of the model is technical analysis, with an emphasis on indicators designed to identify trends and major trend reversals.
  • We consider 14 ETFs for inclusion in the strategy, all of which are actively traded with large AUMs and low fees, but we expect to typically hold 5-8 ETFs at any given time to maintain our desired concentration.
  • The primary goal of TACK is to leverage sector leadership, while navigating equity market downdrafts through asset allocation. Opportunities are identified using signals from a combination of technical indicators designed to identify price trends, after which a quantitative momentum overlay is applied to finalize the portfolio.
  • The idea to develop a fund came from Fairlead Strategies’ subscribers, who wanted an easy way to assert the views imparted in the research reports. Get a FREE trial of the research here.

The Fund seeks capital appreciation with limited drawdowns. There is no guarantee that this, or any, investing strategy will be successful. Because the fund may invest in 5 to 8 sector ETF issuers and up to 3 defensive ETF issuers, it is subject to the risk that the value of the fund's portfolio may decline due to a decline in value of the equity securities of particular ETF issuers or the value of fixed income and other investments held by the defensive ETFs. The fund is subject to the performance of the underlying ETF shares in which it invests. In addition, fund shareholders indirectly bear the expenses charged by the underlying ETFs.

Potential Investable Universe

RISK ON:


  • Materials Select Sector SPDR Fund (XLB)
  • Communication Services Select Sector SPDR Fund (XLC)
  • Energy Select Sector SPDR Fund (XLE)
  • Financial Select Sector SPDR Fund (XLF)
  • Industrial Select Sector SPDR Fund (XLI)
  • Technology Select Sector SPDR Fund (XLK)
  • Consumer Staples Select Sector SPDR Fund (XLP)
  • The Real Estate Select Sector SPDR Fund (XLRE)
  • Utilities Select Sector SPDR Fund (XLU)
  • Health Care Select Sector SPDR Fund (XLV)
  • Consumer Discretionary Select Sector SPDR Fund (XLY)

RISK OFF:


  • SPDR Portfolio Long Term Treasury ETF (SPTL)
  • SPDR Portfolio Short Term Treasury ETF (SPTS)
  • SPDR Gold Shares (GLD)

These securities represent potential underlying strategy holdings and may not represent current fund holdings. The funds listed above represent all the possible investment position, per the prospectus, that TACK may hold at any given time. Such information is not intended to be complete or to constitute all the information necessary to evaluate adequately the consequences of investing in any securities, financial instruments, or strategies described herein. Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment related services. See Defined Terms section at end for definitions.

Allocation Process

For illustrative purposes only

RISK ON:


Sectors that pass the trend-following filters

  • Qualifying sector ETFs fill up to 8 buckets of approximately equal size

RISK OFF:


If 8 sector ETFs don’t pass the trend-following filters

  • Buckets not taken by sectors will be filled with “risk-off” assets

Defined Terms:

Risk-On Classification: This applies where the TACK strategy primarily invests in Sector ETFs to gain market exposure.

Risk-Off Classification: This applies where the TACK strategy invests in Treasury ETFs and Gold Shares to reduce market exposure.

fair·lead

/’ferlēd/ noun

a ring mounted on a boat to guide a rope, keeping it clear of obstructions and preventing it from being cut or chafed.