Program Summary:

HCM’s Active Risk Manager Services are actively managed investment strategies designed for investors seeking (1) growth of capital in the U.S. stock market and (2) an active risk management approach to investing.

While there are no guarantees that our objectives will be met, the program strives to maintain an invested position in the U.S. stock market via index-based ETF’s or VA separate accounts when HCM’s market models indicate a positive market environment exists and to reduce exposure to market risk when our models suggest a negative environment is present.

Alternatives To: Traditional “Buy and Hold” approach to Growth Mutual Funds, Index Funds, Index ETF’s

Securities Used: Exchange Traded Funds or Variable Annuities

New for 2014: The “Next Generation” Active Risk Management Strategy is here. The character of the stock market is constantly changing and evolving. Decimalization, the advent of ETFs, online trading, HFT, and the proliferation of algo-driven trading are examples of developments that have impacted the character of the stock market over the last decade. As a result, we believe that management strategies must also continue to evolve in order to adapt to the ever-changing market landscape.

Our goals for the new, upgraded “next gen” Active Risk Manager system were to diversify both the managers and the strategies employed, reduce volatility, limit exposure to whipsaws, incorporate “index selection” into the process, and attempt to create a “smoother ride” for those involved with the program.

To accomplish these goals, we developed the new programs to (a) incorporate additional managers and additional management strategies and (b) make incremental market moves in and out of the market. The overall intent was to diversify the program in terms of strategy, methodology, and managers.

Read the research report on the “Next Gen” System

Management Strategy:

The management strategy employed by the Active Risk Manager Program is based on two tenets:

  • Seek Absolute Returns
  • Manage Risk at all Times

The Active Risk Manager Services Seek “Absolute Returns”

Although there are never any guarantees in investing, the primary objective of the Active Risk Manager Service is to seek “absolute returns. In simple terms, this means we will strive to produce positive returns regardless of market conditions over a reasonable period of time (generally viewed as ~3 years).

The Active Risk Manager Services Manage Risk at All Times

If the “Credit Crisis” of 2008 taught investors anything, it was that a buy-and-hold approach to the stock market may not be sufficient for all market environments.

We believe strongly that risk management strategies should be part of every investor’s portfolio as we are confident that if given a choice, no investor would intentionally remain fully invested in the stock market during severe market declines.

Unlike traditional growth oriented strategies, HCM’s Active Risk Manager program has the discretion to move to a fully defensive position when we believe market conditions have turned negative.

During negative market cycles, the Active Risk Manager program may utilize a cash position or ETF’s designed to provide an inverse relationship to market indices.

Three Risk Tolerance Levels:

The Active Risk Manager program offers three different risk tolerance levels: Main, Aggressive and Hybrid Strategies.

Main Strategy: The main strategy will be invested long in U.S. stock market via either ETFs or VA separate accounts when our Market Environment Model is positive, effectively short (via inverse ETFs or VA separate accounts) when the Environment Model is negative, or in cash when the Environment Model is neutral.

Aggressive Strategy: The aggressive strategy utilizes the same Environment Model signals as the main strategy. However the program is much more aggressive in that it will invest in “leveraged” ETFs or VA separate accounts (ETFs or VA separate accounts designed to produce returns that are 2x or 3x the return of the underlying index) when dictated by system guidelines.

Hybrid Strategy: The hybrid strategy is in between the main and aggressive strategies. Hybrid utilizes the same Environment Model signals as the main strategy. However the program can be more aggressive in that it may invest in “leveraged” ETFs or VA separate accounts (ETFs or VA separate accounts designed to produce returns that are 2x the return of the underlying index) when dictated by system guidelines.

The Market Environment Model:

At the heart of Heritage’s Active Risk Manager Service programs is our unemotional, disciplined Market Environment Model. The model incorporates literally hundreds of component models and indicators designed to indicate when risk factors for the markets are high, low, or uncertain.

When our Environment model gives us a Green light, it indicates a positive stock market environment.

When the Environment model flashes a Yellow light, it indicates that the environment is uncertain. In this instance, we will keep things simple and attempt to stay in tune with the U.S. stock market using our Short-Term Trend Following (STTF) system.

And when the Environment model gives us a Red Light, it indicates that the risk of a decline in the stock market is rising.


 

Active Risk Manager Services Offered Via:

The Main, Aggressive and Hybrid models utilizing ETFs are offered at:

  • Trust Company of America
  • Fidelity
  • TD Ameritrade
  • Schwab

The Hybrid model is also available at the following Variable Annuities:

  • Prudential/Skandia
  • Nationwide
  • Security Benefit
  • Jefferson National

Contact an HCM Representative to Get Started

Notes:
For the Active Risk Manager programs offered at Variable Annuities, the strategy options are limited to the available sub-accounts offered by that specific Variable Annuity.

Leveraged and inverse ETF are used to hedge against certain market conditions and are not the primary holdings in the programs.

Please see disclosures regarding the risks of investing as well as additional disclosure regarding the risks of using leveraged and inverse ETFs in our Disclosure page