COUNTERPOINT LONG-SHORT EQUITY FUND
The Counterpoint Long-Short Equity Fund targets a market-neutral (zero beta) allocation to individual stocks while seeking broad market exposure of an average of 0.5 beta to equity markets (although the Fund’s actual beta may range from 0.4 to 0.6). The Fund allocates its portfolio between these two sleeves.
For the market-neutral portion of the strategy, the Adviser selects the particular stocks on which to go long and short based on quantitative ranking models. The target portfolio typically holds:
- More than 600 individual securities
- Invests in both US and International developed-market stocks
- Targets sector and currency neutrality.
The Fund’s ranking model is based on research of investment anomalies found in peer-reviewed academic journals, and uses machine-learning techniques to most optimally score the universe of input stocks. The Fund seeks to target the best performing, recent, and persistent anomalies. The Fund’s strategy seeks to capitalize on many market anomalies at any one time.
An example of such an anomaly would be the Asset Growth, where the literature has shown that companies that are more aggressive with spending their capital (Aggressive Asset Growers) have worse average stock performance than companies that are more conservative in their capital expenditures (Timid Asset Growers). This is evidence that shareholders systematically overestimate the investment decision capabilities of company management.
The figure above represents the total compounded return on $1 invested initially in January of 1995 in a monthly rebalanced even-weighted portfolio without transaction costs of U.S. stocks deciled by asset growth ranks. Asset Growth is defined as the annual percentage change in book value of assets in the prior fiscal year. Timid Asset Growers represents the top 10% of stocks with the lowest asset growth while Aggressive Asset Growers represents the 10% of stocks with highest asset growth.
Static Index Position
For the market exposure portion of the strategy, the Adviser selects a blend of equity index futures, equity index ETFs, and/or equity index swaps based on various factors (liquidity, tracking error, and cost) to achieve exposure to the equity markets with a beta of 0.5.
Ph.D. in Finance, Northwestern University
MBA, University of California San Diego
Performance of the fund may be found on the Morningstar CPQIX quotation page..
The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until January 31, 2019 to ensure that the net annual fund operating expenses exclusive of Acquired Fund Fees and Interest/Dividends on Short Sales will not exceed 2.00%, 2.75%, and 1.75% attributable to Class A, Class C, and Class I shares, subject to possible recoupment from the Fund in future years. Without these waivers and expense exclusions, the Fund’s total annual operating expenses would be 2.74%, 3.49%, and 2.49% attributable to Class A, Class C, and Class I shares.
Download US Total Return Swap Basket Holdings as of 12/29/2017