Our Strategies

Assets invested in the Brinsmere Funds are managed using two independently run proprietary strategies developed by the Fund’s investment adviser, The Milwaukee Company. Those strategies are the Systematic Market Beta Strategy (“SMB”) and the Classic Asset Allocation Revisited Strategy (“CAAR”) and Systematic International Strategy (“SIS”).

Systematic Market Beta strategy (SMB)

The Milwaukee Company’s Systematic Market Beta (SMB) Strategy is a rules-based, systematic asset allocation approach aimed at managing risk by adjusting portfolio exposures in response to market conditions. The strategy seeks to reduce the potential impact of prolonged downturns in stocks, bonds, or both asset classes.

The SMB Strategy offers two variants: SMB-Growth (SMB-G) and SMB-Conservative (SMB-C). These variants differ primarily in their risk exposure and allocation targets. During periods of lower estimated market risk, the strategy allocates to a diversified "market beta portfolio" (MBP), which reflects broad stock and bond market exposure.

In the SMB-G variant, equity exposure may be higher to capture potential market gains, while the SMB-C variant maintains a more conservative approach, with lower equity exposure to help manage risk in more volatile market conditions.

When the strategy identifies increased market risks, it may reduce exposure to securities perceived as more vulnerable to declines. This process involves reallocating portions of the portfolio to assets like short-term U.S. Treasuries or low-duration bond funds, which are traditionally viewed as lower-risk investments.

Systematic International Strategy

The Systematic International Strategy (SIS) is a rules-based asset allocation strategy designed to adjust international equity exposure based on global market trends. SIS monitors price trends by comparing the short-term and long-term moving averages of large-, mid-, and small-cap companies in developed and emerging markets outside the U.S. When a positive trend is detected, the strategy allocates to international equities through index-tracking ETFs. If a negative trend is identified, SIS shifts towards more conservative investments, such as short-term U.S. Treasuries or cash-equivalent assets.

This strategy seeks to adapt to changing market conditions but does not guarantee performance, and investors may experience losses based on market fluctuations.

Classic Asset Allocation Revisited Strategy (CAAR)

The intellectual foundation for The Milwaukee Company’s Classic Asset Allocation Revisited Strategy is rooted in “Portfolio Selection” (Journal of Finance, 1952), a research paper written by Nobel Prize-winning economics professor Harry Markowitz.  

CAAR employs a variation of Markowitz’s Critical Line Algorithm (CLA) to identify efficient frontiers. These frontiers represent portfolios that provide the best possible trade-off between risk and return based on historical data and current market conditions. Adjustments to the CAAR optimization process are made using specific parameters that consider volatility and other market factors.

The CAAR Strategy includes two versions: CAAR-G (Growth) and CAAR-C (Conservative), both of which seek to systematically allocate portfolios using a mean-variance approach. However, they differ in their respective risk tolerance and asset exposure.

CAAR-G: In times of heightened market volatility, as measured by the VIX Index, the strategy shortens the lookback period and increases rebalancing frequency. Conversely, during periods of lower volatility, the rebalancing occurs less frequently, and the lookback period is extended. The equity exposure in CAAR-G can vary, typically ranging between 35% and 85%, depending on market conditions.

CAAR-C: Similar to CAAR-G, CAAR-C adjusts its model based on market volatility, but it focuses on more conservative allocations. The equity exposure in CAAR-C typically falls between 20% and 40%, aiming to manage risk in a manner consistent with a more preservation-oriented investment strategy.

Discretionary Asset Allocation Modifications

Importantly, asset allocations may occasionally deviate from the strategies’ model portfolios when the funds’ investment manager believes that data utilized by the strategy does not reflect current market conditions.