Active Portfolio Rebalancing Using ClearMacro Signals

by | Feb 7, 2020

This is a case study demonstrating how a client integrated their own views with ClearMacro investment frameworks in order to generate alpha.

The Case: The client built their own protocol for Tactical Asset Allocation (TAA) using ClearMacro signals.

  • Performance: Generated 3% alpha per annum after costs, according to client’s independent back-tests.
  • Conviction: High
  • Differentiation: Integration of user and ClearMacro inputs.
  • How: 250+ ClearMacro signals and ~10,000,000+ data points.

 

Why should investors care?

Investors can generate alpha by applying ClearMacro signals to their own investment frameworks.

 

The example

“We find that the key to determining information content is through a rigorous and dynamic protocol that properly selects and integrates information based on ClearMacro signals to enhance the odds of success” (ClearMacro client, Top 5 Canadian Pension Fund).

ClearMacro worked with the client to generate portfolio alpha.

Firstly, the client built their own protocol for Tactical Asset Allocation (TAA) which involved 3 steps:

  • Signal Evaluation: signals were selected from ClearMacro’s Signal Library.
  • Signal Aggregation: individual signals were combined into composite signals for country, regional and global information.
  • Composite signals were back tested.

The protocol generated forward-looking return estimates to be employed in tactical portfolio optimization. The protocol was back-tested on a long-short portfolio either between stocks and bonds (time-series) or across different regions/countries (cross-sectional) and considered turnover and transaction costs. The protocol was independently reviewed by a leading management consultancy / advisory firm.

 

How did it benefit the client?

ClearMacro signals were found to contain alpha of 300 basis points per annum, after costs. Performance was particularly high in periods of financial and market stress, and was above the 75th percentile of industry peers.