Positioning to benefit from lower volatility

Models: Quantitative Broad Index, Quantitative Hedging

The broad financial markets experienced upward price action in January, while volatility continued to decrease.

Our volatility-based portfolio was positioned to benefit from periods of lower volatility. And we did in fact benefit from positions in VelocityShares Daily 2X Vix Short Term  (TVIX)-- long volatility-- and VelocityShares Daily Inverse VIX (XIV) --short volatility --as our signals in the Quantitative Hedging Model changed during the month.

Our rotational strategies in our more conventional long/short equity index portfolio primarily kept us in short ProShares UltraShort S&P 500 (SDS) positions, although we reduced exposure towards the latter part of January.

Key to our outlook going forward will be institutional participation in the equity markets, moderate to low volatility, and continued improvement in the economy and corporate visibility into future earnings.

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