Innealta’s proprietary framework was created, and has been refined, over a period of 15 years. At its core, the model is designed to provide expected risk/return information. This information is used to determine attractive environments and dynamically tilt asset class exposures to capitalize on favorable investment opportunities. Innealta’s framework parses through hundreds of empirically proven variables across three broad categories, including:
- Corporate Fundamentals – financial statements metrics (earnings, relative price, profitability, dividends, market capitalization, and others)
- Macroeconomics – health of financial markets (includes monetary policy, the term structure of interest rates, expected inflation, personal consumption, credit spreads, and others)
- Behavioral – Momentum/market conviction metrics are used to quantify the strength of market movements
Each of these datasets provides information at varying speeds and, when used in conjunction, can increase the reliability of the risk/return expectations.
The framework is not a short-term trading model. It is used to inform our portfolio management decisions and is designed to uncover long-term trends for equity exposure.