It has been widely recognized in the investment management industry that asset allocation decisions are often more important to investor returns than the value generated by even the best money managers. Yet the vast majority of exchange-traded funds (ETFs) and mutual funds tend to remain fully invested at all times. Additionally, many asset allocation strategies have historically been “strategic” or relatively immobile, even, for example, in the face of the 2008-2009 financial crisis.
VanEck and Ned Davis Research have developed a tactical asset allocation fund that has the flexibility to freely allocate among securities and cash – the VanEck NDR Managed Allocation Fund.
The two firms have close to 100 years of investing history combined. VanEck has been providing investors with new asset class solutions based on macroeconomic research for over 60 years. For example, VanEck began offering a fund with exposure to international equities in 1956 to provide investors with access to post-WWII industrialisation, and gold shares in 1968 in anticipation of inflation and supply constraints. Ned Davis has an almost 40-year history of researching financial market cycles and using technical signals to supplement macroeconomic and fundamental research.
“Ned Davis Research is a recognised leader in objective market and economic data and analysis. The company follows not just macroeconomic and fundamental forces, but also technical indicators, and has developed an asset allocation model combining all three,” says VanEck’s President and CEO Jan van Eck. “The VanEck NDR Managed Allocation Fund will be just the first offering in what we expect will be a series of VanEck tactical fund solutions.”
VanEck is also currently working on developing other tactical strategies in ETF format.
The Fund, a new open-end mutual fund, seeks capital appreciation by allocating primarily to exchange-traded products (ETPs) that invest in domestic and foreign equities and US debt securities and cash and cash equivalents. In launching the Fund, VanEck seeks to help investors with core asset allocation decisions, particularly related to timing.
The Fund uses NDR’s model that combines over 130 macroeconomic, fundamental and technical indicators to overweight asset classes expected to outperform on a relative basis and underweight or exit those expected to underperform.
“This global tactical asset allocation model seeks to add value – even in sideways markets – relative to a core 60/40 stock/bond portfolio, while actively managing risk throughout all market cycles,” says Tim Hayes, Chief Global Investment Strategist, Ned Davis Research.
The portfolio managers in VanEck’s Portfolio and Risk Solutions group make allocation decisions to ETPs or cash and cash equivalents using the NDR model. This group conducts its own asset allocation and risk modelling research that is used by many of VanEck’s investment strategies. It also maintains continuous interaction with NDR to review the latest research.
“Static asset allocations can lock you in to falling markets. This model has the ability to minimise losses by tactically reducing exposure to falling markets,” says David Schassler, VanEck Portfolio Manager. “The robustness and breadth of NDR’s indicators along with the portfolio’s ability to adjust allocations across asset classes based purely on objective market evidence can help to enhance an investor’s overall performance and risk profile.”