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Trade to meet investment mandate (systematic strategy). Summary prospectus below:
The Leveraged Momentum fund is an investment vehicle inspired by Michael Gayed's research paper "Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks" and SeekingAlpha contributor Logan Kane.
The fund invests in UPRO and TQQQ during periods of low forecasted volatility and shifts to IEF (7-10 year treasury ETF) during periods of high forecasted volatility.
The fund receives levered exposure to the S&P 500 and Nasdaq 100 from the 3x ETFs UPRO and TQQQ. Investing 33% of one's portfolio into either ETF outperforms investing 100% into their underlying indices during periods of low volatility. Conversely, the levered ETFs suffer from volatility drag and underperform their underlying assets during periods of high volatility after adjusting for leverage.
We forecast volatility separately for UPRO and TQQQ by comparing the NAV of their underlying indices to their 200-day moving averages. When the value of either index falls below this indicator, we shift that position entirely into IEF. We also assume a 1% band around the 200-day moving average in case the index hovers around it (i.e. Shift into IEF when the index value falls below 1% of the moving average and vice versa).
We use debt to achieve higher expected returns and aim to keep a constant leverage ratio of 2:1.