ICON’s Strategy-based Investing Portfolios:
Global Moderate Update

Dr. Craig Callahan, ICON Advisers – Founder & President

May 12, 2020

Strategy Based Investing (SBI) is a system which classifies money managers by strategy, and at ICON we define strategy as the manner in which a manager goes about analyzing, buying, and selling stock.

The SBI Portfolios buy and hold the best strategies and the most strategy consistent managers in those strategies according to our system.  In using this process we’ve observed that the effectiveness of each strategy may vary through changing economic and financial market conditions.  One such example during this most recent market volatility is ICON’s SBI Global Moderate Portfolio:

The Global Moderate Portfolio’s domestic “core” portion utilizes four of the historically better performing strategies: Future Growth, Competitive Position, Profitability and Valuation.  For the first quarter of 2020, which ended six trading days after the bottom of the crash, those four strategies ranked 2, 5, 9 and 10, respectively.   In other words, Future Growth and Competitive position held up fair but Profitability and Valuation performed worse.  The old saying about value investing, that it is difficult to get hurt jumping out a basement window, didn’t hold up.

For the international sleeve of the “core” portion of the Portfolio ICON uses the Economic Conditions and Valuation strategies because they are two of the top performing strategies historically, but they ranked 7 and 10, respectively, for the first quarter.  The 23-trading day market crash was not only extremely unusual in its depth and speed but also in terms of strategy behavior.

To identify consistent managers they are assigned a Diamond Ratings (DR), which measure strategy consistency.  Their DR is assigned based on having behaviors that have been associated with superior performance or not having behaviors that have shown to drag on performance.  During the first quarter and during the 23 trading-day market crash those behaviors didn’t matter.  Performance and diamond ratings were random over that unusual setting.

But there is a light at the end of the tunnel.  Through the Portfolio’s strategic blend of top performing strategies and strategy consistent managers we’ve actively participated in the rally and have positive fund returns across the entire Portfolio for the month of April.

To help address these unusual behavioral settings we recently made a change to the International sleeve of the “core” portion of the Portfolio.  We removed a fund that is focused on Latin America and replaced it with a global diversified fund.  This replacement has not changed the strategy tilt of the portfolios as both funds are Economic Conditions and both funds have high Diamond Ratings.  Rather than selling a fund for strategy or DR reason, this trade was based on geographic considerations.

The data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the data quoted. Please call 1-800-828-4881 or visit www.InvestwithICON.com for performance results current to the most recent month-end. The performance results displayed represent the composite performance for all discretionary client accounts in a Portfolio. The performance results reflect the deduction of actual management fees and trading expenses, the reinvestment of dividends and other distributions made to client accounts.

Opinions and forecasts regarding sectors, industries, companies, countries and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry or sector. Investing in securities involves inherent risks, including the risk that you can lose the value of your investment. There is no assurance that the investment process will consistently lead to successful results. Strategy Based Investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies. The relative risk profile shows our assessment of the potential volatility of the SBI portfolios relative to one another and should not be used to compare the portfolios to other types of investments. Each Portfolio has its own strategy and risk/reward profile, and a Portfolio’s risk profile is subject to change.

ICON is the investment adviser to mutual funds in which the Portfolios invest and receives a management fee from the Funds for its advisory services.

ICON Advisers, Inc. (“ICON”) is a registered investment adviser incorporated in 1991.

ICON claims compliance with the Global Investment Performance Standards (GIPS®). To receive a complete list and description of ICON’s composites and/or a GIPS® compliant presentation, please call 1-800-828-4881 or visit www.InvestwithICON.com. Additional information regarding ICON’s policies for calculating and reporting returns is available upon request. Returns are calculated in U.S. dollars. The Portfolios do not utilize leverage or derivatives, although ICON may invest in mutual funds that utilize these tactics.

The SBI Global Moderate Portfolio strives to increase the value of your account through a rise in the market price of securities or NAV of funds (capital appreciation) invested in U.S. diversified and sector, bond and international mutual funds. The SBI Global Moderate Portfolio is a mutual fund portfolio comprised of a 50% strategic equity allocation, a 20% managed tactical allocation, and a 30% fixed income allocation. The portfolio is evaluated and traded, if necessary, on a monthly basis. The portfolio is rebalanced to asset class and strategy level allocations on an annual basis.

The unmanaged Standard & Poor’s Composite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of Large-cap, Mid-cap, and Small-cap U.S. companies.  The Morgan Stanley Capital International (MSCI) All Country World Index ex-United States (ACWI ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States.

Please visit ICON online at InvestWithICON.com or call 1-800-828-4881 for the most recent copy of ICON’s Form ADV, Part 2.