Smart Alpha Improves S&P 500 Portfolios
September 4, 2020
We’ve figured out a way to give our investors over 100% of the upside of S&P 500!
Our research indicates that adding RGN Smart Alpha to a portfolio targeting the returns of a specific underlying index will enhance portfolio upside performance while limiting the downside. The study above shows how an overlay of RGN Smart Alpha will increase returns in up months and limit losses during in down months for the S&P 500 Index.
Our quantitative and short-term strategy leverages machine learning and decades of observations on trader behavior to make smart moves in times of market stress. That’s why we call it the RGN Smart Alpha Program. Systematic alpha generation during these difficult periods separates our strategy from other, less-effective options.
Enhancing index investment returns with RGN Smart Alpha has historically protected profits from substantial drawdowns for 20 years running. In these uncertain times, how can RGN Smart Alpha help you to reduce risk and meet portfolio return expectations? Please click below to contact our Investor Relations department, and let us know what you think!
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This information is furnished by R. G. Niederhoffer Capital Management, Inc. (“RGNCM”) on a confidential basis exclusively to the intended recipient, and is not for redistribution or public use. The information presented is for informational purposes only. An investment in the Programs is speculative and involves significant risks. Such risks are more fully set forth in the private placement memoranda (each, a “PPM”) for the funds (“Funds”) using the Programs.
Unless otherwise indicated, the source material for the data set forth herein is set forth below. Comparisons to indices are for demonstrative purposes only. No representation is made that results will track or otherwise reflect any particular index.
R. G. Niederhoffer Smart Alpha 2x Program (the “RGN Smart Alpha Program 2x”) is a carve-out of RGNCM’s flagship program, the R. G. Niederhoffer Diversified Program (the “RGN Diversified Program”), which has been trading since 1993. the RGN Diversified Program trades across approximately 60 markets (including commodities, currencies, equities and fixed income) and targets annualized volatility of 16%, the RGN Smart Alpha Program 2x trades across approximately 16 markets, limiting itself to fixed income and currencies, and targets 10% annualized volatility. You should have already materials and performance data for the RGN Diversified Program. If you have not received it, please contact Lisa@Niederhoffer.com.
The RGN Smart Alpha Program 2x ultimately launched as a stand-alone program on November 16, 2018. Accordingly, the RGN Smart Alpha Program 2x performance results prior to launch as a stand-alone program are hypothetical based on actual trading of a subset of the RGN Diversified Program, and performance results after launch are pro forma. All performance results are presented net of fees and expenses, as more fully set forth herein.
The RGN Smart Alpha Program 2x returns are net of a fee schedule for a monthly liquidity class. Such fee schedule includes a 0.9% management fee, 18% performance fee (crystallized quarterly), and 0.54% for commissions, administration, and other expenses. RGN Smart Alpha Program 2x returns do not reflect the impact of dividends (because equities will not be traded).
The RGN Smart Alpha Program 2x has been used by the Roy G. Niederhoffer Smart Alpha 2x Fund (Onshore) L.P. (“SA 2x Onshore”). The RGN Diversified Program has been used by Roy G. Niederhoffer Diversified Fund (Offshore), Ltd. (“DFO”), Roy G. Niederhoffer Fund (Ireland) plc (the “Irish Fund”), and other funds and accounts. (In June 2008, the Irish Fund dissolved and its assets were transferred to DFO. Following the reorganization, DFO continued to follow the Irish Fund’s investment strategy in all material respects).
Unless otherwise indicated, RGN Smart Alpha Program 2x returns are based on the daily or monthly performance, as applicable, of the following monthly offerings, net of fees and expenses for Roy G. Niederhoffer Smart Alpha 2x, Ltd. (“SA 2x Offshore”) Class A: (i) through Jun 2008, hypothetical returns based on a subset of the actual trading of Roy G. Niederhoffer (Ireland) No. 1 Fund (“Ireland No. 1 Fund”), a subfund of the Irish Fund, net of SA 2x Offshore Class A fees and expenses; (ii) Jul 2008 to Mar 2016, hypothetical returns based on a subset of the actual trading for DFO Class A, net of SA 2x Offshore Class A fees and expenses; (iii) Apr 2016 to 15 Nov 2018, hypothetical returns based on a subset of the actual trading for DFO Class N, net of SA 2x Offshore Class A fees and expenses; and (iv) 16 Nov 2018 to present, pro forma returns based on actual trading of SA 2x Onshore, net of SA 2x Offshore Class A fees and actual expenses.]
Unless otherwise noted, all RGN Diversified Program returns are net of DFO Class N fees and expenses, and reinvestment of dividends, as follows: (i) Sep 1995 to Jun 2008, pro forma returns based on actual trading results for Ireland No. 1 Fund, using the Class N fee schedule; (ii) Jul 2008 to Mar 2016, pro forma returns based on actual trading results for DFO Class A, using the Class N fee schedule; and (iii) Apr 2016 to present, actual returns for DFO Class N. DFO Class N fees and expenses include a 1.75% per annum management fee and a 20% per annum incentive fee (crystalized quarterly). There is no administration fee, but rather a charge for the administration expense by the third-party administrator and the actual expense assessed to DFO Class N (estimated as 11 basis point per year for the pro forma returns).
For any pro forma results, certain assumptions have been made for the purposes of applying a different fee schedule over a historical period, which may not have been realized under the fee schedule the classes actually traded. RGN Smart Alpha Program 2x returns are represented on a composite basis, and do not represent performance for any particular investor. Therefore, it is possible in any particular period that certain investors may have achieved better or worse results as a result of the timing of their investments and the payment or non-payment of fees.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
COMPOSITE PERFORMANCE RETURNS BASED ON AN ALLOCATION TO AN RGNCM TRADING PROGRAM ARE HYPOTHETICAL RESULTS IN SO MUCH AS SUCH ALLOCATION WAS NOT ACTUALLY MADE. NO REPRESENTATION IS BEING MADE THAT ANY ALLOCATION SET FORTH IN THIS PRESENTATION WILL OR IS LIKELY TO ACHIEVE THE RESULTS SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.
ONE OF THE LIMITATIONS OF A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD IS THAT DECISIONS RELATING TO THE SELECTION OF A GROUP OF ASSETS AND THE ALLOCATION OF AN RGNCM TRADING PROGRAM TO SUCH GROUP OF ASSETS WERE MADE WITH THE BENEFIT OF HINDSIGHT BASED UPON THE HISTORICAL RATES OF RETURN OF THE SELECTED GROUP OF ASSETS IN COMBINATION WITH THE RGNCM TRADING PRORAM. THEREFORE, COMPOSITE PERFORMANCE RECORDS INVARIABLY SHOW POSITIVE RATES OF RETURN. ANOTHER INHERENT LIMITATION ON THESE RESULTS IS THAT THE ALLOCATION DECISIONS REFLECTED IN THE PERFORMANCE RECORD WERE NOT MADE UNDER ACTUAL MARKET CONDITIONS AND, THEREFORE, CANNOT COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FURTHERMORE, THE COMPOSITE PERFORMANCE RECORD MAY BE DISTORTED BECAUSE THE ALLOCATION OF ASSETS CHANGES FROM TIME TO TIME AND THESE ADJUSTMENTS ARE NOT REFLECTED IN THE COMPOSITE. PROSPECTIVE CLIENTS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE RESULTS.
ONLY QUALIFIED INVESTORS WHO MEET SUITABILITY STANDARDS WILL BE ENTITLED TO RECEIVE AN OFFERING DOCUMENT, WHICH CONTAINS ADDITIONAL INFORMATION ABOUT RGNCM AND INFORMATION ABOUT THE RISKS OF INVESTING IN THE APPLICABLE FUND. THIS PRESENTATION IS QUALIFIED IN ITS ENTIRETY BY THE OFFERING DOCUMENTS FOR THE FUNDS.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION (“COMMISSION”) IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO QUALIFIED ELIGIBLE PERSONS, A PPM FOR THIS POOL IS NOT REQUIRED TO BE, AND HAS NOT BEEN FILED, WITH THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A POOL OR UPON THE ADEQUACY OR ACCURACY OF A PPM. CONSEQUENTLY, THE COMMISSION HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY PPM FOR THIS POOL.
THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT REPRESENT AN OFFER TO SELL SECURITIES. SUCH AN OFFER CAN ONLY BE MADE PURSUANT TO AN OFFERING DOCUMENT, WHICH CONTAINS ADDITIONAL INFORMATION ABOUT RGNCM AND INFORMATION ABOUT THE RISKS OF INVESTING IN THE APPLICABLE FUND. THIS PRESENTATION IS QUALIFIED IN ITS ENTIRETY BY THE OFFERING DOCUMENTS FOR THE FUNDS.
An investment in the Funds is speculative and involves significant risks including, without limitation, those set forth herein. Such risks are more fully set forth in the applicable PPM for each Fund. An investor may lose some or all of its investment in the Funds. The Funds’ investments will be highly leveraged and the Funds’ performance may be volatile. The Funds will engage in futures and options trading, both of which involve substantial risk of loss. RGNCM has complete discretion over all investment decisions relating to the Funds. Shares in the Funds are subject to restrictions on transferability and no secondary market for such shares currently exists or is expected to develop. The fees and expenses of the Funds are high and may offset trading profits. A substantial portion of the Funds’ trades may take place on non-U.S. exchanges and markets which may be subject to less regulatory oversight than trades on U.S. exchanges and markets.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Upside Recapture Ratio and Downside Recapture Ratio
The Upside Capture Ratio and the Downside Capture Ratio are methods to calculate a historical performance during market rallies and downturns, respectively. In this analysis, the performance of the Smart Alpha Program (or a portfolio containing the Smart Alpha Program) is examined during rallies and downturns of a variety of different benchmark indexes.
The Upside Capture Ratio indicates if (and how much) the Smart Alpha Program (or a portfolio containing the Smart Alpha Program) has outperformed the benchmark index during periods of market strength. The Downside Capture Ratio indicates if (and how much) the Smart Alpha Program (or a portfolio containing the Smart Alpha Program) has outperformed the benchmark index during periods of market weakness.
The Upside Capture Ratio is calculated by taking monthly return during months when the benchmark had a positive return and dividing it by the return of the benchmark index for the same month. The Downside Capture Ratio is calculated by taking monthly return during months when the benchmark had a negative return and dividing it by the return of the benchmark index for the same month.
For the 20-year period, the geometric (annualized) average was used to calculate the returns used in these ratios. For comparison purposes, the arithmetic average was also calculated to indicate average monthly return.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.