The objective was to develop an easily administered, highly predictive investment system that could manage portfolios for mutual funds and separate accounts for institutional investors and high net-worth investors. The investment system must be able to select a portfolio of industry groups that would provide an investor with a high probability of out-performing the S&P 500 (Ticker SPX). In addition, if the investment system selected a portfolio that had favorable downside risk characteristics, the investment system likely would be able to take better advantage of the mathematical benefit of compounding return. Based on the premise and objective, the AlphaStreamŪ system for stock market investing was developed.
If a truly revolutionary investment system was to be developed, allegiance to all fundamental and technical stock selection bias held dear by Wall Street had to be abandoned. The AlphastreamŪ system was developed in an environment without bias and no allegiance to any investment style or system. It was developed solely on the evaluation of individual stock investment components that, in some unbiased combination, might provide a higher probability of beating the S&P 500.
The AlphaStreamŪ system has no forced stock market exposure based on style bias. Rather, the AlphaStreamŪ system's style exposure gravitates with movement of the market.
Why has no one else thought of this? Typically, the formulation of a stock investment strategy focuses on a desired rate of return that will satisfy a targeted objective in an asset allocation model. In our opinion, little, if any, attention is paid to the probability that the model can replicate its success. We suspect this is why we are unaware of anyone else who has developed a similar system or has a higher probability of sustained success. In the case of the AlphaStreamŪ system, there was no preconceived notion as to how much the performance should exceed the S&P 500, only that excess performance occurred with regularity.