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Optimal Beta Strategy

II Technology’s Optimal Beta Strategy™ embraces the philosophy that markets are efficient but portfolios aren’t. The strategy passively participates in stock and bond market returns while proactively and systematically managing risk by maximizing diversification and maintaining a consistent risk profile.

Start with the
Building Blocks of
Maximize Diversification
Maintain a Consistent Risk Profile

Objective 1 – Maximize Diversification

If one defines exposure to risk as the price of return, maximizing diversification delivers expected returns at the lowest cost. Beginning with an ETF universe that spans the full spectrum of macroeconomic risk premiums, a systematic process is applied that aims to mathematically minimize diversifiable risk.


Objective 2 – Maintain a Consistent Risk Profile


While maximizing diversification minimizes non-systematic risk, volatility at the portfolio level is an expression of the undiversifiable systematic risk that remains. Maintaining a consistent systematic-risk profile ensures the investor is not invested too aggressively when market risk is high. As the portfolio’s volatility rises above certain thresholds, the equity and long-duration bond exposures will be lowered and replaced with short-duration bond exposures, maintaining the portfolio’s risk profile even during times of market stress.

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