Strategy


ProActive Models

At ProActive Investment Management, we blend 2 highly competitive models (A and B), that are designed to complement each another. We call this blend ProActive 1.0. The result is an investment model with a higher than average reward-to-risk ratio. Our goal is to generate competitive returns while assuming reasonable levels of risk for investors.

Model A – is an optimized asset allocation with a protective stop system that preserves capital during periods of extreme market volatility. We rigorously back-test combinations and weightings across diverse sectors of the major asset classes (stocks, bonds and commodities). Contrary to prevailing wisdom, we find that a balanced asset allocation is much less weighted to stocks than most would expect. We also tweak the weightings inside the major asset classes according to key fundamental valuation studies. For example, currently we find the U.S. stock market to be significantly overvalued relative to foreign stock indices, so we are cutting back on our exposure to U.S. stock indices accordingly.

Model B– is a proactive ETF rotation strategy across stock index, fixed income and commodity ETFs (exchange traded funds). Every day, our computer algorithms try to identify those sectors of the market that are likely to out-perform over the coming days. We will over-weight those sectors and under-weight weaker sectors accordingly. Because we rotate into strength on a frequent basis, this model generates much lower risk measures than typical asset allocation strategies or position-based models.

As mentioned, Model A and B are blended together according to optimal weightings based on historical performance. We call this blended program ProActive 1.0.

Furthermore, there are 2 versions of the blended investment program available: ProActive 1.0 is unleveraged, while ProActive 1.5 is identical to the first but is levered 1.5 times in order to generate slightly higher average annual returns than ProActive 1.0 while assuming slightly more risk. We recommend the leveraged model for clients who are able to assume more risk than most.

Model C ProActive Intra Day Trading model (PIDT) – in addition to ProActive 1.0 and ProActive 1.5, we also offer an intraday trading strategy called PIDT. Proprietary algorithms search for scalping opportunities among the most actively traded (i.e. liquid) equity ETFs. Our goal is to make 15 -20 bps per day. This model does not carry positions overnight, thereby offering investors short-term capital gains with much less risk than usual.

Focus on Keeping Expenses Low

We also try hard to reduce expenses and pass those savings on to our investors. We accomplish this by using the lowest cost index funds offered by Vanguard, State Street and Blackrock (iShares). We avoid using mutual funds or star fund manager programs with higher expense fees.

ProActive Investment Management runs these models through Interactive Brokers, our preferred brokerage firm for trade execution and performance reporting. In addition, IB also has among the lowest borrowing costs in the business.

Interactive Brokers LLC is a registered Broker-Dealer, Futures Commission Merchant and Forex Dealer Member, regulated by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), and is a member of the Financial Industry Regulatory Authority (FINRA) and several other self-regulatory organizations. Interactive Brokers does not endorse or recommend any introducing brokers, third-party financial advisors or hedge funds, including Proactive Investment Management LLC. Interactive Brokers provides execution and clearing services to customers. None of the information contained herein constitutes a recommendation, offer, or solicitation of an offer by Interactive Brokers to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Interactive Brokers makes no representation, and assumes no liability to the accuracy or completeness of the information provided on this website.

For more information regarding Interactive Brokers, please visit www.interactivebrokers.com.