PRTO’s strategy is built with the Pareto Principle at its core. The Pareto Principle, commonly referred to as the “80/20 rule,” states that roughly 80% of results generally come from 20% of the inputs. It’s observable across many fields and the principle can be applied as a means of prioritizing and focusing on the vital few things (the 20%) that matter most to outcomes. In this manner, the strategy focuses on the core subset of asset classes that drive the bulk of performance and applies systematic risk overlays as a means of managing downside risk in place of the over-diversification seen in standard allocation models, ultimately leading to less noise and improved outcomes.

The fund is constructed in an “all weather” type of approach and seeks to withstand any market environment. We believe the optimal strategy for compounding returns over long periods of time is to minimize losses during large market downturns. To achieve this, the fund employs purely systematic strategies in a trend-following like manner to adjust allocations as economic conditions change.

The fund has the ability to hold exposure to stocks for times when the economy is accelerating and the ability to eliminate exposure to stocks when the economy is contracting. Additionally, as a means of potentially offsetting losses when stocks fall, the fund will counterbalance its equity exposure with other asset classes like treasury bonds (for periods of decelerating inflation or deflation), gold (for periods of accelerating or stubbornly high inflation) and managed futures (for periods of heightened market volatility).

While the fund seeks to reduce drawdowns, it ultimately attempts to eliminate the “left-tail risk” associated with major bear markets in asset classes. The strategies are built to identify longer-term, structural turning points in markets and will usually hold through the typical pullbacks experienced in a bull market.

The fund can be used to complement and enhance standard asset allocation models or simply as an equity replacement that still provides strong growth potential but with less downside risk exposure.