How the Model Works
The MonograM Model draws down data from the major global indexes and seeks out positive momentum on a 12-month rolling basis. If a market has shown a net increase in total value in the last twelve months, it will advise the fund manager to consider investment, while any market without positive momentum is excluded. It then ranks those positive markets within four sectors, income, defensive, growth (developed), and growth (emerging). It has internal rules on switching, disinvestment and default investments.
While many so-called passive-investment funds face added risk from the propensity to hold onto their ETFs (and therefore markets) for too long, the MonograM model is set up to try and ensure that when a market’s ‘momentum’ turns, or it falls behind another market, it will be switched. With that said, we also aim to avoid over-trading (which has cost and fiscal reporting implications), and we use our committee’s monthly review meetings to avoid any potential false signals.
The MonograM Model has been exhaustively tested to refine the competitive, low cost, simple Absolute Return Model. For more details on the theoretical basis behind the model, please feel free to get in touch via our Contact page here.
Although it is formally simple, the MonograM Momentum Model can be run on any selection of markets, sectors or stocks. It is adjusted on a strictly monthly basis as research has indicated overtrading is a source of poor performance. As an absolute return investment it only invests in large liquid ETFs representing the selected sectors, to reduce costs. It has no derivative content.
As such, it is structured to seek stable returns (see performance reports here). Despite appearances over long periods of time certain markets have dominated investment performance – a dominance revealed by careful statistical examination. Persisting with, for example, the NASDAQ and avoiding for example the FTSE 100, has been a remarkably effective strategy this century. The MonograM Momentum Model would have indicated that allocation before it had become so clearly beneficial.
The MonograM Momentum Fund is a tailored product, and as such, we run portfolios in both dollars and sterling, and provide a monthly report on each. However, it can be run in any convertible base currency the investor wishes to use. Equally, although it is provided as a standard format, the same Momentum theory can be modelled and provided for any liquid asset.
Between January and December 2020, the Monogram Model yielded 11.7%, beating larger funds like Aviva and Invesco by a considerable margin.
The MonograM Model returned 1.8% in June 2021, and 6.7% from January 2021 to June 2021.
Our Investment Philosophy
The investment objective of the MonograM Model product is to achieve performance in the top quartile of all Targeted Absolute Return Models (of which some 115 are listed, just in the UK). Actual performance has beaten this, with top decile positioning. We also aim to provide a totally transparent model, that can be exited or entered at the “flick of a switch” and all holdings liquidated within one business day.
We consider drawdown the only relevant measure of risk and its avoidance is the cornerstone of our investment process. Our process relies on various techniques aimed at identifying, and avoiding underperforming assets. If need be, we are prepared to be fully invested in cash. In addition, we believe that markets and the decision-making process of investors in markets, is generally inefficient. We build portfolios that are resilient in the face of market declines and that compound positive returns stably over the course of the market cycle.
Risk Warning and Other Important Information
This information is intended only for Professional Clients as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients. If you are not sure which you are, please take advice from your independent financial adviser.
The contents of this page are intended as an information service. They are not recommendations and should not be used as a basis for investment. Information gathered directly or indirectly from this page is based on sources that MCM Limited and its personnel deem reliable but MCM Limited can under no circumstances be answerable for the totality or correctness of the information.
Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and you may not get back the full amount originally invested. Your capital may be at risk.