The Atlas Approach
Managing Investment Portfolios
Global Equities
The Atlas approach favors the countries and sectors which are poised to have the more favorable returns. We evaluate fifty-two components of the global equity market: the eleven US sector indices, the US small and midcap indices, thirty-eight single country stock indices (Japan, China, Germany, etc.) and the international small cap index. A multi-factor calculation leads to a ranking of the 52 indices from top to bottom. The primary inputs to the multi-factor ranking are Value and Momentum. Value and Momentum are the most researched equity factors, and the most complementary (see the Fama-French research results on https://factors.atlasca.com/). The global equity allocation has modest tilts above the global market capitalization weights for the favored indices and below the global weight for the less favored indices. Our multi-factor assessment of the components of global equities is updated monthly and posted on https://atlasca.com/current-market-assessment/#quantitativeassessment. Based on a test of our approach since 1996, we estimate that, on average, the Atlas approach to global equities would add 0.5% to 1.0% to annual performance relative to the global equity index.
Fixed Income
For fixed income investments Atlas Capital makes the currently appropriate choice between long maturity or short, high credit risk or low, inflation protected or not, US or international. The Atlas approach to fixed income is an analog to our approach to equities. We evaluate twenty-four categories of fixed income investments, encompassing a range of geographies, maturities, credit quality and inflation protection. The categories which are chosen have the most favorable combination of expected yield to maturity and momentum. Based on a test of our approach since 1996, we estimate that, on average, this approach would add more than 2% per year to the fixed income return relative to investing in core fixed income (Barclays US Aggregate Index) all the time.
Defensive Overlay
Atlas Capital will adjust the equity position from the benchmark allocation based on a quantitative assessment of equity market downside risk. Each month, Atlas updates a set of metrics indicating the downside risk of the equity market. The most recent dashboard may be found here: https://atlasca.com/equity-downside-risk-dashboard/. When downside risk is low, the client will hold more than the target equity weight, while if downside risk is high the client will hold less than target weight. If the Atlas approach were applied to global equity since 1996, with 10% more allocated to equity in safe periods and 10% less allocated to equity in dangerous periods, the portfolio return would have increased by 0.5% to 1.0% per year. There would have been meaningful savings during the technology bust after 2000 and the Global Financial Crisis of 2007 – 2008.