Market insights and analysis

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

1st Quarter | 2024

Quarterly recap



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

By Jerry Wagner

Throughout my life, I have been a fan of science fiction. To pick up a book that can take me on a journey through space or time has never failed to remove me from the everyday and broaden my horizons.

In their 1970 best seller “Future Shock,” futurists Alvin and Heidi Toffler explain sci-fi’s benefits:

“Science fiction is held in low regard as a branch of literature, and perhaps it deserves this critical contempt. But if we view it as a kind of sociology of the future, rather than as literature, science fiction has immense value as a mind-stretching force for the creation of the habit of anticipation. Our children should be studying Arthur C. Clarke, William Tenn, Robert Heinlein, Ray Bradbury and Robert Sheckley, not because these writers can tell them about rocket ships and time machines but, more important, because they can lead young minds through an imaginative exploration of the jungle of political, social, psychological, and ethical issues that will confront these children as adults.”

It’s this “imaginative exploration” that has been for me the key to science fiction’s attraction. Philip K. Dick, an author from the golden age of science fiction in the 1950s and ’60s and the source of Amazon’s hit “The Man in the High Castle” wrote, “The real origin of science fiction lay in the seventeenth-century novels of exploration in fabulous lands. Therefore Jules Verne's story of travel to the moon is not science fiction because they go by rocket but because of where they go.”

Mark Twain, another favorite, is not normally thought of as a science fiction writer, but he did dabble in time travel with his “A Connecticut Yankee in King Arthur’s Court.” He, too, understood its driving force. “Explore. Dream. Discover,” he wrote.

I think the benefit of the imaginative exploration that is science fiction is the broadening “habit of anticipation” that it has on one’s thinking. Said Twain in his autobiographical “The Innocents Abroad,” “Travel is fatal to prejudice, bigotry, and narrow-mindedness.”

Successful investing requires thinking outside the box

In constructing an investment portfolio, creating a solid core is essential. It assures that you don’t wander too far from the central purpose of investing, which is to secure the benefits of the opportunities presented by the financial markets.

But securing the core is not the only ingredient for successful investing. Thinking outside the box is essential too.

Just as science fiction’s “imaginative exploration” can broaden us to better handle life’s unexpected future, devoting a portion of one’s portfolio to investments that broaden the portfolio beyond the central function of the core is critical.

Adding an “explore” portion to one’s portfolio can serve many purposes. It can allow one to hedge against a particular risk. It can also focus on a future opportunity. But its principal purpose is to add the “habit of anticipation” to one’s portfolio to manage risks and opportunities of an uncertain future that cannot be addressed entirely by a core portfolio.

That’s why, in addition to our QFC Multi-Strategy Core solutions, we also offer our QFC Multi-Strategy Explore lineup of portfolio options.

As with all of our QFC multi-strategy services, the QFC Multi-Strategy Explore offering is designed to be a “strategy of strategies.” In other words, it uses allocations to multiple dynamically managed strategies to achieve a defined investment purpose. It provides the monitoring, allocation, and reallocation among desired strategies in a manner designed to achieve a specified investment purpose.

Based on over 20 years of experience managing these types of “strategies of strategies,” Flexible Plan Investments has found that combining actively managed strategies can provide additional layers of portfolio defense and return potential. QFC Multi-Strategy Explore delivers three levels of risk management: (1) the dynamic risk management employed within the QFC Funds used in each strategy, (2) the active management among the funds required by the strategies themselves, and (3) the dynamic allocation employed among the strategies by QFC Multi-Strategy Explore itself.

QFC Multi-Strategy Explore is a Quantified Fee Credit (QFC) offering, meaning it makes use of only Flexible Plan’s subadvised Quantified Funds. This allows us to use fee credits to offset all or a portion of our advisory fee, resulting in low-cost separately managed accounts.

Here’s a brief description of each of the QFC Multi-Strategy Explore options (the minimum investment for each is $5,000):

QFC Multi-Strategy Explore: Low Volatility is designed for investors seeking (1) an addition of steady returns and reduced volatility to a diversified portfolio, (2) defense against rising interest rates/inflation and equity-asset-class volatility, and (3) conservative growth potential.

QFC Multi-Strategy Explore: Low Correlation is designed for investors seeking (1) a hedged, low-correlation exposure to alternative-asset-class investments; (2) defense against rising interest rates/inflation; and (3) growth potential.

QFC Multi-Strategy Explore: Special Equity is designed for investors seeking (1) liquid alternative equity strategies, such as market-timing and seasonality strategies; (2) the ability to go defensive and reduce exposure to the equity asset class in times of market turmoil; and (3) equity-like growth potential.

QFC Multi-Strategy Explore: Equity Trends is designed for investors seeking (1) a dynamically risk-managed blend of tactical and trend-following equity strategies, (2) the ability to go defensive and reduce exposure to the equity asset class in times of market turmoil, and (3) equity-like growth potential.

In studying the interaction between the QFC Multi-Strategy Core and Explore offerings, we have discovered that uniting the two in a portfolio improves the diversification and durability of the combined portfolio. Both the Diversification Score (which detects the extent that portfolio components are not correlated) and the Durability Score (which tests how successfully the resultant portfolio would have navigated financial crises of all sorts in the past) increase substantially over a core-only portfolio.


My all-time favorite sci-fi writer was Robert A. Heinlein. In a conversation with Jerry Pournelle, another favorite, Heinlein is reported to have said, “Once you get to earth orbit, you’re halfway to anywhere in the solar system.” In other words, getting to earth orbit was the hardest part, requiring the most heavy lifting and scientific acumen.

Similarly, investing a substantial part of one’s account in a core portfolio (we recommend at least 65%) is crucial to achieving most of your investment objectives; it puts you in a position to take on new opportunities or further manage risk. It is the explore portion that can then take one’s account from earth orbit to anywhere else you may desire.

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