S-Network FolioBeyond Optimized Fixed Income Index is comprised of best-of-breed Fixed Income Exchange Traded Funds (“ETFs”) representing 23 discrete sub-sectors spanning most liquid Fixed Income market sectors and further defined by credit risk and duration. This Index provides a dynamically adjusted ETF portfolio that enhances returns in comparison to the commonly followed Bloomberg Barclays U.S. Aggregate Bond Index (“AGG”).
FolioBeyond’s Fixed Income model is an advanced factor-based optimization algorithm that captures the major drivers of performance and risk in the Fixed Income markets.
It is a robust, automated institutional quality algorithm calibrated with proper out-of-sample and sensitivity testing. It is designed to provide an optimal framework for enhancing risk-adjusted portfolio returns using advanced analytical techniques while systematically incorporating all the major relevant factors that impact performance of the Fixed Income sectors.
This algorithmic process is automated and updated daily with current market prices and analytical measures. Portfolio rebalancing is triggered when risk, as measured by the historical and projected volatilities of the Fixed Income sub-sectors, deviates by a set threshold relative to the historical volatility of AGG.
The index allocates to an optimal portfolio of Fixed Income sector ETFs, all subject to risk constraints that incorporate volatility, momentum, correlation and stress testing, to enhance performance relative to its benchmark.
The underlying optimization algorithm is run daily based on current market data and analytics. Rebalancing transactions occur whenever the portfolio risk deviates from the target volatility by a specified percentage, generally resulting in a limited number of rebalancing transactions measured on a monthly basis.
The index relies on a well-calibrated optimization process that is updated daily. While the model parameters remain fixed, the underlying ETF constituents may change over time based on a thorough analysis and pre-screening of individual ETFs as possible sector components.