Probabilities Long/Short

Transcription

1 Probabilities Long/Short

2 Strategy Overview: The portfolio manager uses quantitative and qualitative analysis to identify trading opportunities based on long term trends and patterns in historical data as well as daily political, financial and stock market-based events.

3 Strategy Philosophy: Probabilities Tactical Strategy Portfolio is a Tactical US Equity strategy that uses quantitative and qualitative analysis. We believe the markets fluctuate in repeating seasonal and political patterns and that a systematic, multi-strategy approach that effectively capitalizes on these patterns will provide returns that exceed the market. We believe we can best grow wealth and protect capital by being out of the market during the time periods when there is a higher probability of downside risk and being in the market during the time periods when there is a higher probability of upside reward. Therefore we seek to identify bullish and bearish signals that provide entry and exit points based on historical trends and exercise tactical discretion resulting from our rules-based, event-driven methodology. We believe the investor is best served with a diversified portfolio that, along with stocks, bonds and cash, also includes assets that have low, zero or negative correlation to the stock market in an attempt to reduce portfolio volatility and increase return.

4 Portfolio Construction: The portfolio is constructed from market index ETFs, Primarily S&P 500 index exposure using ETFs from Direxion, ProShares, Vanguard and other fund sponsors. The portfolio is actively traded on a daily basis to achieve targeted exposure to equity indexes based on the portfolio manager s assessment of the strategy s rules and signals. The portfolio may shift from cash to fully invested and back to cash in as short a time frame as a single day.

5 Risk Management: The portfolio is built with index ETFs, primarily representative of the S&P 500 and other broad based U.S. equity indexes. Leveraged ETFs are employed as a portion of the allocation, and Inverse ETFs are also used at times for inverse (short) exposure. Max position size (short term trades) is 100% of the portfolio, invested in an index ETF to achieve diversified market exposure. Max Sector Concentration: N/A, all investment positions are in diversified index ETFs or cash. Max Country Exposure: U.S.; Max Gross Exposure: 3x (leveraged 3 times S&P 500 index exposure); Max Net Exposure: 3x (leveraged 3 times S&P 500 index exposure); Max Long Exposure: 3x (leveraged 3 times S&P 500 index exposure); Max Short Exposure: -1x (1 times inverse S&P 500 exposure, through investment in an inverse S&P 500 ETF).

6 Winning Trade Example: On June 20, 2014 purchased the 0.5x inverse basket based on strategy rules. Exited the trade on June 25. June 20, 2014: Purchased -1/2x inverse basket. Held until June 25. Bought 1,075,630 ProShares Short S&P June 25 exited the position. Sold 1,075,630 ProShares Short S&P

7 Losing Trade Example: On July 29, 2014, bought the 0.25x long basket based on a strategy signal. Exited the trade the next day. 7/29/14 Bought 81, /30/14: Sold 149,

8 Company Overview: Probabilities Fund Management, LLC is an independent Registered Investment Advisor ("RIA"), registered with the SEC, based in San Diego, California. The firm commenced operations in October 2007 and is headed by Founder and Chief Investment Officer Joseph B. Childrey. The firm serves as Portfolio Manager for the Probabilities Fund and the Probabilities VIT Fund. Offering daily liquidity and transparency, these open-ended 40-Act mutual funds are invested in our proprietary ETF- Based Tactical Long/Short US Equity strategy that seeks to outperform the S&P 500. The investment process seeks to identify specific entry and exit points to capitalize on long-term variations in the US stock market. From 2008 to 2013 the firm served as Portfolio Manager for the predecessor hedge fund, Probabilities Fund L.P.

9 Management Bios: JOSEPH B. CHILDREY, FOUNDER, CIO Mr. Childrey, managing partner, is an avid fan of behavioral finance and a strong believer in the wealth building power of the global financial markets. Having developed and refined an investment philosophy that incorporates the principles of behavioral finance and seasonal investing, Mr. Childrey has over 20 years experience in the investment management industry. He launched and managed the Probabilities Fund L.P., a hedge fund, and successor funds since 2008 to present. He served private and institutional clients at Wells Fargo/AG Edwards for 15 years, starting his career at PaineWebber/UBS. An inventor, he has a patented product in the consumer electronics industry that is marketed and sold worldwide. JONATHAN L. CHATFIELD, CFA, CHIEF PORTFOLIO MANAGER Mr. Chatfield holds the Chartered Financial Analyst designation and received a BA in Agricultural and Managerial Economics from the University of California, Davis. With over 20 years of experience in the investment management industry, he has served previously as a portfolio manager and investment management consultant and has developed computer software for the financial services industry. Mr. Chatfield is a member of the CFA Society of San Diego and the CFA Institute.