Graduate finance students got real-world experience with managing an active fund thanks to a gift from alumnus Vince Lowry ’79.

The Global Beta Value/Quality Index strategy first identifies securities with a quick ratio that falls within the top half of the S&P 500. We then identify the securities that fall in the bottom half of that subset by their current price to sales ratio. Finally, we look at the securities’ 12-month trailing revenue, then sum all 100 securities’ revenues for the period, then divide each security’s revenue by the sum of all 100 securities revenue for the period, which becomes each security’s weighting. To manage concentration risk, Global Beta Advisors imposes a 5% security issuer cap on the portfolio.

The Global Beta Growth/Momentum Index first removes companies with the highest price to forward earnings multiple within the S&P 500. We then identify the 100 securities in the S&P 500 with the greatest increase in revenues year over year for the most recent quarter. We use their market capitalization float to weight each of the 100 securities. We identify each of the securities’ current market capitalization, then sum all 100 securities’ market capitalization for the period, then divide each security’s market capitalization by the total market capitalization, which becomes the security’s weighting. To manage concentration risk, Global Beta Advisors imposes a 10% security issuer cap on the portfolio.

The Global Beta Low Index strategy identifies the 100 securities in the S&P 500 with a beta that ranks in the lowest quintile in the S&P 500. We identify each of the securities’ 12-month trailing revenue, then sum all 100 securities’ revenues for the period, then divide each security’s revenue by that sum, which becomes the security’s weighting. To manage concentration risk, Global Beta Advisors imposes a 5% security issuer cap on the portfolio.

The Global Beta Size Index strategy takes the 100 securities with 12-month trailing revenue growth rates that rank in the highest quintile in the S&P 600. We use their 12-month trailing revenue, relative to each other, to weight those 100 securities. To manage concentration risk, Global Beta Advisors imposes a 5% security issuer cap on the portfolio.

The Global Beta Smart Income Index strategy identifies the securities of the S&P 900 with the highest average 12-month trailing dividend yield over the prior 4 quarters. From that universe, we select the top half of companies within each GICs sector by yield. We then sum those selected securities’ revenues for the period and divide each security’s revenue by that sum, which becomes the security’s weighting. To manage concentration risk, Global Beta Advisors imposes a 5% security issuer cap on the portfolio.

From these single factor index strategies, we developed two multi-factor rotation strategies: an all cap multi-factor strategy and a large cap multi-factor strategy. The driving principle in the rotation model is the relative price-to-sales ratio. We agree with the previously mentioned white paper that relative strength based on the price-to-sales ratio best systematically and idiosyncratically positions an investor’s exposure. We believe it is most prudent to align the investor’s portfolio using principles, such as balanced exposure, that position the investor for long-term success.

The rotation is based on each indices’ current price-to-sales ratio relative to its historical moving average. If the current price-to-sales ratio is one standard deviation above the historical average, we assign the index an underweight. We assign the index an overweight if the current price-to-sales ratio is one standard deviation below the historical average. If the current price-to-sales ratio falls within the mean (i.e.: between one standard deviation below and above the historical average), then we assign the index an equal weight. The strategy is a fully invested strategy; therefore, we prorate any excess weight, amongst the four indices. This is what we mean when we say we manage to a normal channel of price-to-sales.

The Global Beta All Cap Multi-Factor index strategy rotates the Global Beta Value/Quality index, the Global Beta Growth/Momentum index, the Global Beta Low Beta index, and the Global Beta Size index tactically. The rotation is based on each indexes’ current price to sales relative to its historical moving average. If the current price to sales is one standard deviation above the historical average, that index is assigned as underweight. If the current price to sales is one standard deviation below the historical average, that index is assigned as overweight. If the current price to sales falls within the mean (i.e.: between 1 standard deviation below and above the historical average), then it is assigned an equal weight. The strategy is a fully invested strategy; therefore, any excess weight that is not invested based on the aforementioned parameters are then prorated amongst the 4 indexes.

The Global Beta Large Cap Multi Factor index strategy rotates the Global Beta Value/Quality index, the Global Beta Growth/Momentum index, and the Global Beta Low Beta index tactically. The rotation is based on each indexes’ current price to sales relative to its historical moving average. If the current price to sales is one standard deviation above the historical average, that index is assigned as underweight. If the current price to sales is one standard deviation below the historical average, that index is assigned as overweight. If the current price to sales falls within the mean (i.e.: between 1 standard deviation below and above the historical average), then it is assigned an equal weight. The strategy is a fully invested strategy; therefore, any excess weight that is not invested based on the aforementioned parameters are then prorated amongst the 3 indexes.