iQ ETF Style Box Rotation Model

INVESTMENT OBJECTIVE

The iQ ETF Style Box Rotation investment model seeks to provide risk-adjusted returns in excess of the S&P 500 Index by selecting the four style box ETF strategies trading below their historical mean.

INVESTMENT PROCESS - A “Technical Value” ETF Model

The iQ ETF Style Box Rotation investment model utilizes an elegantly robust and unique strategy that combines style box rotation with monthly technical indicators.

The Model begins with a starting universe of twelve ETF technical strategies (one for each style box ETF) and selects the four strategies furthest below their twelve-month simple moving average.  Each market timing strategy is unique to its underlying ETF and can take a long or cash position in any given month.  This may create a situation in which cash (or money market) is selected on a monthly basis.

The style boxes from which the Model selects its four strategies are:

  • Large Cap (Core, Growth, Value, & Equal-Weight)

  • Mid Cap (Core, Growth, Value, & Equal-Weight)

  • Small Cap (Core, Growth, Value, & Equal-Weight)

Why rotate between style boxes?

Rotating between investment style boxes can offer potential benefits for advisors who are looking to take advantage of market cycles and changing investor trends. Here are some reasons why advisors might choose to rotate between investment style boxes:

1. Diversification: Rotating between style boxes can provide diversification benefits by investing in a variety of investment styles, such as value, growth, or income-oriented stocks. This can help reduce portfolio risk and potentially enhance returns by tapping into the growth potential of different investment styles.

2. Risk Management: Rotating between style boxes can also be a way to manage risk by adjusting portfolio allocations to different investment styles as market conditions change. For example, during periods of economic uncertainty, investors may rotate towards defensive, income-oriented investments such as value stocks, while during periods of economic growth, investors may rotate towards more aggressive, growth-oriented investments such as growth stocks.

3. Potential for Higher Returns: Rotating between style boxes can also offer potential for higher returns by taking advantage of changing investor preferences and market cycles. By investing in styles that are currently in favor, investors may be able to capitalize on market trends and potentially earn higher returns.

However, it's important to note that rotating between investment style boxes can also come with risks, such as missing out on potential gains if the market does not behave as expected.