Four Quantitative Fund and ETF Portfolio Selection Methods

Summary

The document outlines four portfolio approaches: a calendar effect fund of funds (FOF), a performance enhancement FOF, a fund size undervaluation FOF, and a core-satellite ETF portfolio. The calendar strategy selects five active equity funds equally using their prior-year returns at the end of March and rebalances annually. The performance strategy ranks managers using style-adjusted, decay-weighted stock-selection alpha, then optimizes fund weights subject to exposure and position constraints. The size strategy combines share-related information with long-term selection alpha to seek capable but relatively small funds. The ETF approach pairs a long-term core allocation with a sector rotation model intended to adapt to macroeconomic conditions.

The article reports historical and out-of-sample performance through March 2022, including annualized returns and benchmark-relative results; it also notes that some portfolios had negative returns year to date. These are reported observations, not independent validation. The write-up provides limited detail on data construction, testing assumptions, statistical significance, or how the methods may perform in other periods. Rebalancing varies by strategy, and reported results should be read in that historical context.

Key ideas

• The calendar strategy selects five funds equally using prior-year performance at the end of March and rebalances annually.
• The performance enhancement approach optimizes fund weights around style-adjusted, decay-weighted stock-selection alpha while constraining exposures.
• The size undervaluation signal combines fund share information with long-term selection alpha to identify smaller funds with demonstrated selection ability.
• The ETF portfolio combines a long-term core allocation with a macro-conditioned sector rotation component.
• Reported returns cover historical and out-of-sample periods through March 2022, but the document gives limited detail on statistical validation or testing assumptions.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.