Optimal Beta Strategy

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


The Inductive Inference Technology™ used to develop II Technology’s Optimal Beta Strategy uses historical data as a means of validation, not optimization. Featuring innovative techniques to filter out noise and adopting a forecast-free methodology, the Optimal Beta Strategy maximizes the diversification and manages the overall risk present in the market today. 

Step 1
Start with the
Building Blocks of
Step 2
Maximize Diversification
Step 3
Maintain a Consistent Risk Profile

Investments are systematically chosen from 17 ETFs that span the full spectrum of macroeconomic-related risk premiums and segment the primary drivers of diversification – economic sectors, global economic regions, stages of economic development and the flight-to-quality characteristic of US Treasuries.


Objective 1 – Maximize Diversification


Beginning with this ETF universe, a systematic process is applied that aims to minimize all diversifiable sources of risk, and thus identify the portfolio with the highest expected return per unit of risk. If one defines exposure to risk as the price of return, maximizing diversification delivers returns at the lowest cost. Threshold-based rebalancing adjusts the portfolio as needed in order to maintain its diversification profile.


Objective 2 – Maintain a Consistent Risk Profile


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 the iShares 1-3 Year Treasury Bond ETF, maintaining the portfolio’s systematic-risk profile even during times of market stress.

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