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ProfitScore’s Fixed Income Approach Sets It Apart

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Note:  This is the first in a series of blogs on active management related to my May 2015 Investment Advisor article Beating Buy and Hold:  A Thinking Man’s Guide to Market Timing, in which we look at active managers with unique strategies worthy of advisors’ consideration.

John McClure has never taken a traditional path to success in the RIA space. His six-person, Eagle, Idaho-based firm, ProfitScore Capital Management, which manages $150 million, doesn’t actively seek individual investors. He instead relies on other RIAs to license his 14 underlying strategies

His background is also unusual. McClure started as a financial analyst for Maytag, and later worked for a software company that calculated credit scores. His expertise in this area led to the development of systematic long/short indices that execute in the fixed income and equity markets. 

His most popular strategy and, based on recent market action, the most timely, is his Long/Short U.S. Treasuries Index. Like the firm’s other offerings, the model utilizes a multi-strategy approach. “Finding which data set is moving a market is the Holy Grail in this business,” he says. The index currently utilizes ten distinct strategies, all of which can be long, short, or flat. 

The program won the annual NAAIM Shark Tank competition, which pits active investment managers against one another in the pursuit of subadvisor agreements. The program is available on the Trust Company of America platform and is utilized in the Arrow Alternative Solutions Fund (ASFNX).  

The company recently registered as a commodity trading advisor (CTA), a move that will allow the strategy to be accessible on dbSelect, a Deutsche Bank platform that offers institutional investors access to liquid strategies. 

According to McClure, the popularity of his long/short Treasury approach is based on the price pressure experienced by the bond markets. “For over 30 years, investment grade bonds have produced a tail wind for investment portfolios. The net of inflation return for investment grade bonds during the ‘50s, ‘60s and ‘70s was a negative number. Investment managers are going to have to learn how to function in a long-term rising interest rate environment,” he says.

See additional articles and blogs by Ben Warwick, including:

 Beating Buy and Hold:  A Thinking Man’s Guide to Market Timing

3 Reasons We’re Not at a Market Top: Searching for Alpha for June 2015


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