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How dynamic, risk-managed investment solutions are performing in the current market environment

4th Quarter | 2023

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Current market environment performance of dynamic, risk-managed investment solutions.

By Jerry Wagner

A few years ago, staff members were waiting for us at the airport, which was teeming with people when the transatlantic plane touched down. In a crowded, cavernous room, with signs everywhere, they found our luggage and escorted us through customs. Whisked into a private car, they sped us to the dock and our rivercraft.

On board the ship, they handed us a glass of champagne and the key to our private suite. Everything was provided: meals, a fully stocked bar, daily room cleanings, even free daily laundry service.

It was our home for 10 wonderful days as we toured Europe by river. It was the ideal turnkey experience.

Why turnkey investing?

Merriam-Webster Dictionary defines “turnkey” as “built, supplied, or installed complete and ready to operate.”

Investopedia.com states that “a turnkey solution is a type of system built end-to-end for a customer that can be easily implemented into a current business process. It is immediately ready to use upon implementation and is designed to fulfill a certain process. …”

At Flexible Plan Investments (FPI), we offer a suite of multi-strategy investment products designed to provide this type of turnkey service. With them, I hope to make your FPI experience just as pleasant as our river cruise.

Of course, all of our individual strategies are also turnkey. You select them and leave the rest of the work to us: We monitor them, impose the discipline of trading them, and then report their performance to you.

But selecting which strategies to include in a portfolio remains difficult. We offer over 100 different strategies and risk profiles. How do investors or their advisers choose which strategies to include in their portfolios? How do they achieve one of our primary goals, which is true diversification in investor portfolios?

We provide a tool for that: our Illustration Generator (available on flexibleplan.com to financial advisers after login), which allows advisers to design a portfolio of FPI strategies and analyze its historical performance, diversification, and correlation. But even armed with tools, picking the best combination and the proper weighting of each strategy can still be daunting.

FPI is a turnkey asset management program—or TAMP, as it is referred to in the industry. In 1998, we began to offer a wide variety of actively managed strategies on a single platform where they could be combined in an investor’s portfolio. As a TAMP, we also traded, monitored, and reported the performance of all of the strategies in the portfolio, in addition to handling the invoicing and fee collections.

This program is called Strategic Solutions. Having all of the strategies on a single platform makes it easy to change strategies. But deciding which strategies to drop, which to add, and when to do it can be challenging.

Take the stress out of investing with turnkey portfolios

During our more than 20 years of experience with multi-strategy portfolios, we have always had a turnkey, “strategy of strategies” option. These options choose among all of the strategies and risk profiles to pick the best portfolio of strategies for an investor’s risk profile.

QFC Fusion 2.0

Our Fusion strategy is the most recent—and most popular—iteration of our turnkey portfolio of strategies. Hundreds of millions of dollars have been invested in it over the years, and we have continued to improve it each year since it was introduced in 2013.

Our latest set of improvements has resulted in QFC Fusion 2.0.

QFC strategies are those that exclusively use our subadvised mutual funds, allowing us to deliver fee credits that lower the advisory cost of the strategy, as well as two levels of risk (and opportunity) management:

  1. Dynamic risk and opportunity management within each mutual fund.
  2. Dynamic risk and opportunity management among all of the funds used in each strategy.

In addition, as QFC Fusion 2.0 is one of our turnkey multi-strategy services, it also offers yet another level of dynamic risk and opportunity management:

  1. Active risk and opportunity management of the allocation among the QFC strategies.

One of the disadvantages of Fusion has been its simplicity. Since Fusion provides a portfolio selected from all of the strategies offered—both core strategies and explore varieties—it does not allow an investor or adviser to obtain the advantages of a dynamically managed portfolio where just one of the two subcategories, core or explore, are needed in a portfolio. It also gives up some customization opportunities.

QFC Multi-Strategy Core and QFC Multi-Strategy Explore

Many investors only invest in a core strategy. Usually, it is a portfolio of asset classes that is managed using an old-fashioned, essentially passive approach. Of course, FPI offers many ways to add a dynamically managed core to that portfolio. The challenge, of course, is how to choose among them. What combinations should investors use? And how should investors decide how to weight, change, replace, or add to them?

The same analysis applies to the “explore” or “satellite” approaches that many want to add to a core portfolio to customize it further. Investors use explore strategies to deal with an eventuality that they are concerned may happen, to add additional factors to the investment, or to simply enhance returns or reduce risk further.

Again, FPI offers many ways to add a dynamically managed explore strategy to that portfolio. But, again, how should investors choose? What combinations should they use? How should investors decide how to weight, change, replace, or add to them?

The solution? FPI’s new low-cost, turnkey “strategy of strategies”: Our QFC Multi-Strategy Core and QFC Multi-Strategy Explore services.

Now you can add a core strategy with multiple defenses (QFC Multi-Strategy Core) to enhance the risk management of a passive core portfolio that provides only the single defense of diversification. And because QFC Multi-Strategy Core is actively managed, it’s designed to take advantage of opportunities that are not available to the passive core.

QFC Multi-Strategy Core also takes the work out of choosing the right mix of core strategies to add to a portfolio. The strategy selects the core strategies to use and decides when each is appropriate. It then weights the components; allocates; and, over time, reallocates the strategies for you.

Like QFC Fusion 2.0, QFC Multi-Strategy Core is available in five suitability profiles: conservative, moderate, balanced, growth, and aggressive.

QFC Multi-Strategy Explore is available for four different investment scenarios: low volatility, low correlation, special equity, and equity trends. The first is for those with more conservative expectations, the second is moderate to balanced focused, and the final two would be deemed more growth-oriented.

In addition to adding these strategies to existing portfolios, the QFC Multi-Strategy Core/Explore offerings can stand alone or be combined.

If you simply want a core portfolio but don’t want to choose among our many QFC core strategies, we can create a blended, managed portfolio of all of our QFC core strategies for you. You acquire asset and strategy diversification, three levels of dynamic opportunity and risk management, five suitability profiles to choose from, and a low-cost separately managed account. And you can stop there.

Or, you can go on to add one to four QFC Multi-Strategy Explore options and pick the amount to allocate to each.

We recommend starting with at least 65% in QFC Multi-Strategy Core. QFC Multi-Strategy Explore options can be added to complete a “core and explore” portfolio—turnkey plus customization!

The minimum investment in QFC Fusion 2.0 or QFC Multi-Strategy Core is $25,000, while a QFC Multi-Strategy Explore option requires $5,000.

Investors who maintain accounts with a balance of at least $100,000 in either QFC Fusion 2.0 or QFC Multi-Strategy Core receive all of the added benefits of our Prime accounts. These include added risk customization (QFC Fusion 2.0 only), waiver of our paper delivery fee, and access to our quarterly conference call.

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Turnkey solutions provide a superior user experience. They are designed to be easier to walk into and a better way to cruise throughout all of the varied seas the financial markets can deliver to bring us to new lands of opportunity.



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