The Long-Term Risk Manager Service is for investors seeking a disciplined, long-term approach to risk reduction during bear market cycles in the stock market. In marketing parlance, The Risk Manager is a "bear market protection plan."

While there are never any guarantees in investing, the Risk Manager strives to maintain long positions during positive stock market environments and to mitigate portfolio risk during negative market environments.

Alternative To: Traditional "Buy and Hold" approach to Growth Mutual Funds, Index Funds, Index ETF's
Securities Used: Exchange Traded Funds, Mutual Funds or Variable Annuities
Minimum Account Size: $25,000
Managers Employed: 2
Strategies Employed: 5
Offered At: TD Ameritrade, Fidelity  and Trust Company of America, as well as selected Variable Annuities.
Three Offerings: Conservative, Moderate, Growth

View The Conservative Risk Manager FactSheet
View The Moderate Risk Manager FactSheet
View The Growth Risk Manager FactSheet

Objective:
The overriding objective of The Risk Manager is to preserve capital during extremely negative market cycles. The program focuses on the U.S. stock market, is long-term oriented, moves incrementally, and is designed to reduce exposure to risk during major declines such as those seen in 2000-02 and 2008.

Management Strategy:
The Risk Manager is driven by a series of robust, disciplined market models designed to indicate when the risk of a severe decline is high. When our market models indicate that risk factors in the stock market are elevated, the program will automatically and unemotionally take defensive measures including raising cash (the program has the ability to move to a 100% cash position), reducing beta in portfolio holdings, and overweighting defensive positions such as government bond ETFs/mutual funds.

In addition to The Risk Manager's systematic method of managing exposure to stock market risk, the program also incorporates a strategy designed to "tilt" a portion of the portfolio to the bond market when conditions are favorable.

In terms of strategy implementation, The Risk Manager employs an incremental approach to adjusting portfolio exposure. Each of the risk models utilized within the program control a set percentage of the overall portfolio exposure. Thus, when a model issues signal, that portion of the portfolio is moved to its respective defensive position. This incremental exposure strategy avoids the high-risk, all-or-nothing, "market timing" approach.

A Diversified Approach to Managing Risk:
We believe it is important to diversify portfolios not only by asset class, but also by strategy, manager, and methodology. Thus, the Risk Manager has been designed to incorporate multiple strategies, multiple managers, and multiple methodologies – all within a single program.

Timing is Everything
The central focus of The Risk Manager is to protect portfolio values during severe market declines. And as the saying goes, a picture is worth a thousand words. Below are the hypothetical signals generated by one of the three risk management models utilized within the Risk Manager program.

                                            Hypothetical Illustration
   Risk Manager System 1 Signals - S&P 500 Daily 1-1-1980 through 10-31-2014


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Please note that the signals shows above represent only a portion of the overall exposure system. However, the chart illustrates the potential of staying in tune with the long-term moves of the stock market over a long period of time.

The signals depicted above are hypothetical illustrations of one of the systems currently in use in the Risk Manager program. The signals do not represent actual trading. Please see important disclosures regarding the inherent limitations of hypothetical backtested results. Past performance is not a guarantee of future results.

An Adaptive Strategy
History shows that using the same aggressive strategy that can produce strong gains in bull market environments can lead to outsized losses during a bear market. For example, consider what happened to technology holdings from 1999-2002. Thus it is important for portfolios to be able to adapt to changing environments.

The Risk Manager is designed to systematically adapt to changing market cycles by using different strategies during bull and bear market environments.

Three Risk Manager Service Offerings

  • Conservative
  • Moderate
  • Growth

All three Risk Manager programs utilize the same signals from our risk models and take an incremental approach to risk exposure.

The Conservative Risk Manager

The Conservative Risk Manager utilizes a long/neutral (cash) approach to stock market exposure. In addition, up to 40% of the portfolio may be allocated to bonds. Thus, during a severely negative market environment, the program will be allocated primarily to cash, government bonds, and/or other defensive positions.

Conservative Portfolio Allocation:
Equity Exposure System: 60%
Stock/Bond Tilt System: 40%

Maximum net long position: 100%
Maximum net short position: 0%

View The Conservative Risk Manager FactSheet

The Moderate Risk Manager

The Moderate Risk Manager utilizes a long/short/neutral approach to exposure. In addition, up to 20% of the portfolio may be allocated to bonds. Thus, during severely negative market environments, the Moderate program has the ability create an artificial net short position via the use of inverse ETFs and mutual funds as well as using cash, government bonds and/or other defensive positions.

Moderate Portfolio Allocation:
Equity Exposure System: 80%
Stock/Bond Tilt System: 20%

Maximum net long position: 100%
Maximum net short position: 100%

View The Moderate Risk Manager FactSheet

The Growth Risk Manager

The Growth Risk Manager utilizes a long/short/neutral approach to exposure in the stock market and will make use of leveraged positions under certain conditions. Thus, during positive market environments, the program may be invested up to 150% long. And in severely negative market environments, the Growth program has the ability create an artificial net short position via the use of inverse ETFs and mutual funds as well as using cash or other defensive positions.

Growth Portfolio Allocation:
Equity Exposure System: 100%

Maximum net long position: 150%
Maximum net short position: 100%

View The Growth Risk Manager FactSheet

 

Contact A Heritage Representative To Get Started

Have Questions?  Contact Heritage or give us a call at (630) 250-4700

Please see disclosures regarding the risks of investing as well as additional disclosure regarding the risks of using leveraged and inverse ETFs in our Disclosure page