Dynamic Overlay Strategy seeks capital growth by exploiting the efficiencies of Exchange Traded Funds (ETFs) or mutual funds within the framework of broadly diversified portfolios. The economy moves through cycles and the various asset classes perform differently at various points within the cycles. Minimum target allocations among available asset classes are established, then the quantitative and rules-based Dynamic Overlay is implemented to both manage downside risk and import alpha from asset classes that may complement the core allocations irrespective of market trend or condition.
Dynamic Overlay employs both a strategic (passive) and tactical (active) allocation, as each has benefits. The best approach is to combine both to achieve a dynamically balanced portfolio. This investment strategy does so with rules-based and quantitative management techniques in a multi-part process.
Explanation for performance of PCM Dynamic Overlay
Description
Past performance is no guarantee of future returns. Investors should consider the investment objectives, risks, charges, and expenses carefully prior to investing. The Dynamic Overlay is suitable for the long-term investor.
Performance from April 2006 to December 2007 is an actual Rydex Funds model account net of 1% annual fees. Performance from January 2008 is an actual FOLIOfn model account including 1% annual fees. Individual account performance may vary substantially. April 2006 through September 2010, the model was reallocated each quarter. Starting in October 2010 the Model is reallocated bi-quarterly or as needed at PCM’s sole discretion. It is not anticipated that the new reallocation schedule will make a material difference in performance (back testing showed only a slight gain.) All performance shown assumes reinvestment of dividends, model performance is calculated net of a 1% management fees, but , does not include custody or trading expenses. The investment return and principal value of an investment will fluctuate dramatically. When shares are redeemed, they may be worth more or less than their original cost. Deviation from the model’s diversified structure may result in different risk, return and diversification characteristics and would therefore not be representative of the model portfolio’s design.. The performance shown is a model, it does not meet for the purpose of GIPS reporting criteria. Investors should not rely on charts and graphs alone when making investing decisions.
The benchmark for the Dynamic Overlay is the S&P 500 index. The SP 500 is an unmanaged Index whose data was obtained from S&P 500 website The strategic components used in the PCM Dynamic Overlay model may include, but are not limited to, the following: the Nasdaq 100 (QQQQ), SP500 Barra Value Index (IVE), SP500 Index (SPY), SP Midcap 400 (MDY), Russell 2000 Index (IWM), 2 Year Treasury Bond Price, 5 Year Treasury Bond Price, 10 Year Treasury Bond Price, 30 Year Treasury Bond Price, 1-3 Year Treasury Bond (SHY), EAFE (gross USD), Emerging Market Indices (gross USD) or PCM Dynamic International ETF, Utilities (XLU), Energy (XLE), Health Care (XLV) & (IYH), Financials (XLF), Financial Services (IYG), Materials (XLB), Telecom (IYZ), Consumer Discretionary (XLY), Staples (XLP), Industrials (XLI), Technology (XLK), transportation (IYT), Biotech (IBB), Pharmaceuticals (PPH), Real Estate (IYR), Gold (GLD), Metal and Mining (XME), Long Bond (TLT), XAUSM Gold and Silver Index, iShares commodity (GSG), and money market. Sources for exchange traded fund, stock and XAU Index information were obtained from Yahoo Finance. Adjusted closing price data adjusted for dividends and splits was obtained from Yahoo Finance, MSCI website or Reuters. Monthly and quarterly returns are calculated using Microsoft Excel.
Investments in securities of non-US issuers involve investment risks different from those of US issuers, including currency risks, political, social and economic risks. This model will invest in various portfolios of exchange-traded funds and other securities as approved, from time to time, by the principal of PCM at its sole discretion.
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PCM Dynamic Overlay Monthly Total Returns Gross of Fees |
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|
Year |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
YTD |
|
|
2006 |
|
|
|
2.49% |
-4.14% |
0.75% |
-0.60% |
1.81% |
0.32% |
2.79% |
2.09% |
0.80% |
6.28% |
|
|
2007 |
0.96% |
0.07% |
1.16% |
2.03% |
1.90% |
-0.80% |
-0.86% |
0.51% |
1.84% |
2.42% |
-1.70% |
-0.26% |
7.42% |
|
|
2008 |
-0.78% |
0.67% |
-0.84% |
0.84% |
1.46% |
-3.22% |
0.00% |
-0.14% |
-2.02% |
-5.18% |
-1.73% |
1.23% |
-9.49% |
|
|
2009 |
-2.71% |
-2.86% |
2.03% |
3.24% |
2.13% |
-0.28% |
2.32% |
0.95% |
1.58% |
-1.40% |
3.70% |
-0.18% |
8.57% |
|
|
2010 |
-3.88% |
2.18% |
5.18% |
0.12% |
-7.71% |
-4.26% |
6.17% |
-0.87% |
3.48% |
1.65% |
-1.06% |
7.07% |
7.17% |
|
|
2011 |
0.62% |
2.46% |
-2.08% |
2.94% |
0.27% |
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|
|
|
|
|
4.20% |
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What's the right portfolio for you or your clients? Provident Capital offers 4 portfolios that one can select that seek to replicate the risk and return characteristics of our Absolute Indexes. 
