NextGen Active Risk Manager

 

The NextGen Active Risk Manager Series

The "NextGen" Active Risk Manager is a series of actively managed, growth-oriented investment programs designed for investors seeking (1) growth of capital in the U.S. stock market, (2) an active, risk-managed approach to investing, and (3) an “absolute return” strategy (which we define as seeking positive returns over a full market cycle - approximately 3-5 years) regardless of market conditions.

Download the NextGen Main Fact Sheet (Updated through 12/31/14)
Download the NextGen Growth Fact Sheet (Updated through 12/31/14)
Download the NextGen Aggressive Fact Sheet (Updated through 12/31/14)

Alternative To: Traditional "Buy and Hold" approach to Growth Mutual Funds, Index Funds, Index ETF’s
Securities Used: Exchange Traded Funds or Variable Annuities
Minimum Account Size: $25,000
Managers Employed: 3
Strategies Employed: 7
Offered At: TD Ameritrade, Fidelity, Trust Company of America.

The NextGen Active Risk Manager Approach

While there are never any guarantees in investing, the overarching goal of the NextGen Active Risk Manager Series is to keep accounts positioned on the proper side of the market's big, important moves.

Toward this end, Heritage managers strive to maintain an invested position in the U.S. stock market via index-based ETF’s or separate accounts (for Variable Annuity investors) during positive market environments, to be defensive during negative market environments, and to take less risk during neutral market environments.

The key tenets to the management philosophy of the Active Risk Manager Series are as follows:

  • Manage Risk on a Daily Basis
  • Stay in Tune with the Market's Major Moves
  • Utilize Multiple Managers and Strategies
  • Use the Right Strategy for the Market Environment
  • Make Incremental Adjustments to Exposure Levels
  • Adapt to Changing Market Environments

The latest iteration of the Active Risk Manager System (aka the "NextGen" series) represents a significant upgrade to the program. The programs utilize multiple managers and multiple strategies, and make incremental moves in and out of the market. In addition, the "next generation" programs strive to reduce volatility, limit exposure to whipsaws, incorporate “index selection” into the process - all in an effort to create a “smoother ride” for investors.

Download the Report on The Evolution of the NextGen Active Risk Manager - From 1982 to Present

Managing Risk - Every Single Day

If the "Tech Bubble Bear" of 2000-2002 and/or the "Credit Crisis" of 2008 taught investors anything, it was that a buy-and-hold approach to the stock market is not sufficient for all market environments.

We believe strongly that risk management strategies should be part of every investor’s portfolio. We are confident that if given a choice, few investors would intentionally remain fully invested in the stock market during severe market declines.

Unlike traditional growth oriented strategies, Heritage’s Active Risk Manager programs have the discretion to move to a fully defensive position by moving to a 100% cash position or inverse ETF's when we believe market conditions have turned negative.

Using The Right Strategy At The Right Time

What makes Heritage's Active Risk Manager Series unique in the industry is the use of different investment strategies in different market environments. You see, the same pedal-to-the-metal aggressive approach that is successful in bullish markets can lead to very large losses in a bearish market. And then we believe a different strategy altogether is required to achieve success in a neutral or sideways market environment.

Thus, the portfolio allocations for the Active Risk Manager strategies are determined by the overall stock market environment.

At the heart of Heritage's Active Risk Manager Service programs is our unemotional, disciplined Market Environment Model. The model incorporates scores of component models and indicators designed to indicate when risk factors for the markets are high, low, or uncertain. But you can think of it as a stoplight.

When our Environment model gives us a Green light, it indicates that a positive stock market environment has historically ensued. During positive market environments, the Active Risk Manager will be invested long in the stock market via ETFs or VA Separate Accounts.

When the Environment model flashes a Yellow light, it indicates that the environment is uncertain. During neutral market environments, the Active Risk Manager will take less risk and utilize more "swing" or "mean reversion" tactics.

And when the Environment model gives us a Red Light, it indicates that, according to history, the risk of a decline in the stock market is rising. During negative market environments, the Active Risk Manager will take defensive measures.

Three Risk Tolerance Levels:

The NextGen Active Risk Manager Series offers three strategies designed to accommodate differing risk tolerance levels:

  • NextGen Active Risk Manager - Main
  • NextGen Active Risk Manager - Growth
  • NextGen Active Risk Manager - Aggressive

The trading signals for three programs are identical. The primary difference between the Main, Aggressive and Growth strategies is the amount of leverage employed. All three models will utilize leveraged ETFs (ETFs designed to deliver 2x or 3x the performance of the underlying index) at times. The maximum leverage permitted in the Main model is 150%, the maximum leverage permitted in the Growth model is 200%, and the maximum leverage permitted in the Aggressive model is 300%.

NextGen Active Risk Manager - Main Strategy:

The "Main" Strategy is designed for growth-oriented investors. In positive market environments, the "Main" strategy will be invested long in U.S. stock market via either ETFs or VA separate accounts. The strategy will utilize defensive positions (via inverse ETFs or VA separate accounts) and/or cash when the Environment Model is negative. And the strategy will utilize a tactical, mean-reversion approach when the Environment Model is neutral.

The Main strategy may invest in "leveraged" and/or inverse ETFs or VA separate accounts (ETFs or VA separate accounts designed to produce returns that are 2x the return of the underlying index) when dictated by strategy guidelines. The maximum leveraged position for the "Main" strategy is 1.5X times the return of the underlying index. Please see important disclosures regarding inverse and leveraged ETFs.

NextGen Active Risk Manager - Aggressive Strategy:

The "Aggressive" Strategy is designed for aggressive-growth investors who are well suited for the high degree of volatility associated with such an approach. The aggressive strategy utilizes the same Environment Model signals as the main strategy. However the program is much more aggressive in that it will invest in "leveraged" and/or inverse ETFs or VA separate accounts (ETFs or VA separate accounts designed to produce returns that are 2x or 3x the return of the underlying index) when dictated by strategy guidelines. Please see important disclosures regarding inverse and leveraged ETFs.

NextGen Active Risk Manager - Growth Strategy:

The growth strategy is in between the main and aggressive strategies. The strategy utilizes the same Environment Model signals as the main strategy. However the program can be more aggressive in that it may invest in "leveraged" and/or inverse ETFs or VA separate accounts (ETFs or VA separate accounts designed to produce returns that are 2x the return of the underlying index) when dictated by strategy guidelines. Please see important disclosures regarding inverse and leveraged ETFs.

IMPORTANT: Your Investment Time Frame

The Active Risk Manager may utilize short-term (defined as 1-3 weeks) trading strategies at times. However, the Active Risk Manager program itself is NOT a short-term investment strategy. Investors should be willing to remain invested in the strategy for a minimum of 3 years.

Active Risk Manager Available At:

The Main, Aggressive and Growth models utilizing ETFs are offered at the following custodians:

  • TD Ameritrade
  • Fidelity
  • Trust Company of America

Download the Report on The Evolution of the NextGen Active Risk Manager - From 1982 to Present

Contact A Heritage Representative To Get Started

HCR also offers a Long-Term Risk Manager service designed to guard against the severe declines experienced during bear market cycles. Learn More.

Have Questions?  Contact Heritage or give us a call at (630) 250-4700

Download the NextGen Main Fact Sheet
Download the NextGen Growth Fact Sheet
Download the NextGen Aggressive Fact Sheet

Please see disclosures regarding the risks of investing as well as additional disclosure regarding the risks of using leveraged and inverse ETFs in our Disclosure page