What is Lee Adaptive Strategies?

What are Lee Adaptive Strategies?

A next generation suite of investment products and capabilities managed by Lee Capital Management which seeks to address the critical investor priority of loss avoidance. Today’s markets call for a practical approach to building portfolios. We believe that selective exposure to markets, participating in good periods and becoming defensive or even exiting during bad periods, is the best way to build wealth through market cycles. We employ a market adaptive approach that seeks to avoid significant market declines while capturing positive returns in typical market environments.

What is our Philosophy?

What is our Philosophy?

We believe that equity and fixed income markets over time, and on average, naturally tend to increase in value and that this appreciation is a fundamental source of wealth accumulation. We recognize that markets generally rise over long periods, they do not rise every month, every year or even every decade. We do not, however, believe that it is necessary to bear the brunt of the worst market periods to benefit from the best. We believe that with careful quantitative modelling it is possible to identify when risk outweighs reward in the market.

We focus on absolute returns rather than benchmark relative returns. And we believe that risk is the danger of significant loss, not the volatility of daily results.

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Joseph L. Demmler

Managing Partner

Nathan Eigerman CFA

Managing Partner

Kevin Orr

Managing Partner

Jeffrey S. Feinberg

Partner,
GC & Chief Compliance Officer

Adam Altus

Partner

John M. Donaghey CFA, CAIA

Partner,
Head of Institutional Business

Betsy Amenta

Financial & Operations Consultant

Michael F. Hotchkiss

Senior Advisor

John Van Der Zyde

CyberSecurity/Information Technology Consultant

Lee Adaptive Large Cap Sector Strategy>

Investment Strategy

The Lee Adaptive Large Cap Sector Strategy is a portfolio that can hold sector ETFs, which contain large cap US equities from each industry sector, as well as cash. Each of the eleven sectors is evaluated individually. Those that are expected to appreciate in absolute terms are held in the portfolio. If only a few are expected to appreciate, the portfolio will be partially weighted in cash. If no sectors are expected to appreciate, the portfolio will be entirely in cash.

Lee Adaptive Large Cap Sector Strategy>

Investment Decision Making Process

The decision to own or not own a sector ETF is based on a disciplined, consistent, and repeatable quantitative process. Each sector is rated on its medium-term prospects for appreciation, based on a variety of quantitative factors that include momentum and valuation. Those that score above a threshold on our quantitative model are considered more likely to gain than lose in value and will be held in the portfolio. Those below the threshold are not owned. The quantitative model is run, and the scores refreshed, daily, although buys and sells are much less frequent in the portfolio.

Lee Adaptive Large Cap Sector Strategy>

Portfolio Construction

The output of our quantitative model is binary, a decision to own or not. We do not take partial positions in ETFs, nor do we have “best ideas” that are over-weighted. Owned sectors are weighted proportionally to a normal weight that is calculated as the average between an equal and capitalization based weighting for each sector. If at least five (of eleven) sectors are owned in the portfolio, the portfolio will be fully invested in equity and hold no cash. If fewer than five sectors are owned, the portfolio will hold some or all cash. At four sectors owned, the portfolio will be 20% cash, at three 40% cash, at two 60%, at one 80%, and at no sectors owned will be 100% in cash.

Lee Adaptive Broad Market Sector Strategy>

Investment Strategy

The Lee Adaptive Broad Market Sector Strategy is a portfolio that can hold sector ETFs, which contain large-cap US equities from each industry sector, a Russell 2000 (small cap) ETF, and cash. Each of the twelve ETFs is evaluated individually. Those that are expected to appreciate in absolute terms are held in the portfolio. If only a few are expected to appreciate, the portfolio will be partially weighted in cash. If no ETFs are expected to appreciate, the portfolio will be entirely in cash.

Lee Adaptive Broad Market Sector Strategy>

Investment Decision Making Process

The decision to own or not own an ETF is based on a disciplined, consistent, and repeatable quantitative process. Each is rated on its medium-term prospects for appreciation, based on a variety of quantitative factors that include momentum and valuation. Those that score above a threshold on our quantitative model are considered more likely to gain than lose in value and will be held in the portfolio. Those below the threshold are not owned. The quantitative model is run, and the scores refreshed, daily, although buys and sells are much less frequent in the portfolio.

Lee Adaptive Broad Market Sector Strategy>

Portfolio Construction

The output of our quantitative model is binary, a decision to own or not. We do not take partial positions in ETFs, nor do we have “best ideas” that are over-weighted. Owned ETFs are weighted proportionally to a normal weight that is calculated as the average between an equal and capitalization based weighting for each market segment. If at least five (of twelve) sectors are owned in the portfolio, the portfolio will be fully invested in equity and hold no cash. If fewer than five sectors are owned, the portfolio will hold some or all cash. At four sectors owned, the portfolio will be 20% cash, at three 40% cash, at two 60%, at one 80%, and at no sectors owned will be 100% in cash.

Lee Adaptive Global Equity Strategy>

Investment Strategy

A global solution portfolio of ETFs designed to protect clients in severe down markets and participate in up markets. A single diversified core holding that is diversified between both US and International equity exposures including emerging markets. Implemented with country and regional equity ETFs and cash – and nothing else. Positions for each ETF can be fully invested, partially invested, or not held at all, depending on our outlook for that equity region. At the most extreme, if all ETFs are not held, the portfolio can be entirely in cash.

Lee Adaptive Global Equity Strategy>

Investment Decision Making Process

The decision to own or not own an ETF is based on a disciplined, consistent, and repeatable quantitative process. Each is rated on its medium-term prospects for appreciation, based on a variety of quantitative factors that include momentum and global market sentiment. Those that score above a threshold on our quantitative model are considered more likely to gain than lose in value and will be held fully in the portfolio. Those below a lower threshold are not owned. ETFs with scores in between are owned with partial weights. The quantitative model is run, and the scores refreshed, daily, although buys and sells are much less frequent in the portfolio.

Lee Adaptive Global Equity Strategy>

Portfolio Construction

The output of our quantitative model is a 0 to 100 weighting score for each ETF, where 100 signifies full ownership, 0 means no ownership, and scores from 1 to 99 denote a level of partial ownership. If all ETFs are fully owned, they will be held in weights roughly proportionate to their relative capitalizations. Partial (or zero) weights result in a scaling back from full weight, with the removed weighting redistributed proportionally to other ETFs. The maximum weighting for any ETF is 150% of its full (all ETFs invested) weight. Weighting that cannot be allocated to ETFs because of low scores and maximum weights are allocated to cash. If all ETFs have a score of 0, the portfolio will be 100% allocated to cash.

Lee Adaptive Global Allocation Strategy>

Investment Strategy

A global solution portfolio of ETFs designed to protect clients in severe down markets and participate in up markets. A single diversified core holding that is diversified between equity and fixed income, including both US and International equity exposure. Implemented with country and regional equity ETFs, fixed income ETFs and cash – and nothing else. Positions for each ETF can be fully invested, partially invested, or not held at all, depending on our outlook for that region. At the most extreme, if all ETFs are not held, the portfolio can be entirely in cash.

Lee Adaptive Global Allocation Strategy>

Investment Decision Making Process

The decision to own or not own an ETF is based on a disciplined, consistent, and repeatable quantitative process. Each is rated on its medium-term prospects for appreciation, based on a variety of quantitative factors that include momentum and global market sentiment. Those that score above a threshold on our quantitative model are considered more likely to gain than lose in value and will be held fully in the portfolio. Those below a lower threshold are not owned. ETFs with scores in between are owned with partial weights. The quantitative model is run, and the scores refreshed, daily, although buys and sells are much less frequent in the portfolio.

Lee Adaptive Global Allocation Strategy>

Portfolio Construction

The output of our quantitative model is a 0 to 100 weighting score for each ETF, where 100 signifies full ownership, 0 means no ownership, and scores from 1 to 99 denote a level of partial ownership. If all ETFs are fully owned, they will be held in weights roughly proportionate to their relative capitalizations. Partial (or zero) weights result in a scaling back from full weight, with the removed weighting redistributed proportionally to other ETFs. The maximum weighting for any ETF is 150% of its full (all ETFs invested) weight. Weighting that cannot be allocated to ETFs because of low scores and maximum weights are allocated to cash. If all ETFs have a score of 0, the portfolio will be 100% allocated to cash.

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