NBI Liquid Alternatives ETF (NALT)

14 June 2019 by National Bank Investments
Glass Box Series

NALT: What’s under the hood
Highlights

  • Brief Introduction of the implemented QI models and how they work together 
  • NALT’s QI models are designed to control risks and maintain a low correlation to equity indices 
  • NALT uses quantitative investment (QI) models to determine the most suitable long and short positions on a wide variety of asset classes

Introduction

NALT implements what is called a Systematic Global Macro investment strategy. The quantitative models aim to potentially achieve the best performance given the investment objective, while avoiding emotional and irrational human reactions.

In the case of NALT, different types of quantitative models recommend investments in 22 futures contracts on the five following asset classes: 5 U.S. government bonds, 4 currencies, 3 metal commodities, 5 agricultural commodities and 5 energy commodities. The absence of equity index futures contracts contributes to NALT’s decorrelation to these indices.

On top of the asset allocation functions, different types of risk-controls are also embedded in the QI models to maintain the highest possible level of consistency for NALT’s risk-return-decorrelation profile.

In this document, we look at what’s under NALT’s hood by first presenting the portfolio construction process and then explaining the QI models that drive NALT’s momentum.

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Legal notes

NBI ETFs are offered by National Bank Investments Inc., a wholly owned subsidiary of National Bank of Canada. Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus or ETF Facts document(s) before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. NBI ETFs do not seek to return any predetermined amount at maturity. Index returns do not represent NBI ETF returns. The indicated rates of return are the historical total returns for the periods including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, commission charges or income taxes payable by any unitholder that would have reduced returns. Past performance may not be repeated.

 

The information and opinions herein are provided for information purposes only and are subject to change. The opinions are not intended as investment advice nor are they provided to promote any particular investments and should in no way form the basis for your investment decisions. National Bank Investments Inc. has taken the necessary measures to ensure the quality and accuracy of the information contained herein at the time of publication. It does not, however, guarantee that the information is accurate or complete, and this communication creates no legal or contractual obligation on the part of National Bank Investments Inc.

Views expressed regarding a particular company, security, industry, market sector, future events (such as market and economic conditions), company or security performance, upcoming product offerings or other projections are the views of only the portfolio manager, as of the time expressed and do not necessarily represent the views of National Bank of Canada and its subsidiaries (the “Bank”). Any such views are subject to change at any time based upon markets and other conditions, which could cause actual results to differ materially from what the portfolio manager presently anticipates or projects. The Bank disclaims any responsibility to update such views. These views are not a recommendation to buy or sell and may not be relied on as investment advice. Any financial transaction involves risks and factors to consider. This document is not intended to describe all the risks associated with financial transactions. Before investing, it is recommended to carefully examine all conditions, assess the risks and determine whether it is appropriate for your financial needs and objectives in all respects. It is also recommended to consult financial, legal and/or tax advisors before investing.

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