Pinnacle’s Dynamic Market Strategy provides investors with a traditional strategic portfolio but with an additional level of risk management. The Dynamic Market Strategy will appeal to advisors and clients who prefer a more passive, low cost and tax efficient investment solution but who also wish to mitigate market volatility by adding an additional layer of risk management.
The idea is simple. Diversification and rebalancing are foundational risk management principles, but they are becoming less effective over time as markets become more global and correlations migrate towards 1.0, especially in down markets. Pinnacle therefore adds an additional level of risk management that adjusts portfolio risk exposure at market extremes. Specifically, it looks at valuation and decides to own the S&P 500 when it is cheap and expected returns are above average or to own fixed income or cash when the S&P 500 valuation is expensive and expected returns are below average or negative. This strategy essentially employs a risk management technique commonly practiced by strategic advisors in a more disciplined fashion.
The goal, of course, is to reduce portfolio volatility and produce sufficient alpha to offset the cost of an otherwise strategic portfolio. Dynamic Market offers three model portfolios to investors: Conservative, Moderate, and Appreciation.