Introduction To - The GT Financial Investment Process

GT Financial employs a Global Macro approach to investment strategy that aims to deliver superior risk-adjusted returns through its tactical analysis of equities, bonds, currencies and commodities.

A key point of differentiation for GT Financial is its ability to position itself in equity market investments that will take advantage of key market opportunities in other asset classes. This investment strategy not only provides a superior level of stock selection but also improved returns.

GT Financial aims to provide absolute returns across the investment cycle through short selling of CFD's (AS permitted by law) during market downturns and concentrating client investments in those sectors that perform well under such conditions.  This can lead to a much greater efficiency in the use of capital.

GT Financial’s investment strategy and process centres around two major principles:

1)  Top-down market forces are generally more powerful than bottom-up forces in governing market fluctuations and;

2)  Markets inherently move through cycles however the length of each cycle can vary based on the extent to which top-down forces allow.

By concentrating the investment process around these two core principles GT Financial is able to identify market trends and invest with this momentum, while also being sufficiently aware of the conditions that bring about market reversals.

Achieving Out-performance

By identifying these top-down market forces GT Financial can identify the specific industry groups that will outperform significantly in the prevailing market conditions and expose the majority of its recommended portfolios to those key superior stocks. (** Market outperformance is not guaranateed and there are risks involved in trading financial markets. Clients should assess their own risk profile before committing to this product)

There is a significant behavioural component that determines a specific sector or industry groups’ performance over the investment cycle, indicating that the same process or strategy that is successful in one cycle is unlikely to produce the same results or returns in a differing cycle. Any investment process that implements the same strategy across all sectors, industries and market cycles is likely to experience severe underperformance.

By adopting an equal marriage between quantitative and qualitative processes within the investment strategy, our portfolios are able to avoid the weakness of adopting only one process style while exploiting the advantages of the other. Pure qualitative processes can lack the discipline and insights that a quantitative framework brings, and are often influenced by market sentiment while quantitative processes reject real-world information. The portfolio investment process has been constructed to avoid these two key core deficiencies.   

The combination of first applying a disciplined quantitative process before moving through to a qualitative screen provides a sound investment strategy.

Recommended Portfolios – The Professional Approach

The newsletter is divided into three recommended portfolios that are carefully managed as part of a unique and successful strategy – not a random collection of speculative stock picks each week. Through this process investors can follow a professional investment strategy rather then merely gambling their fortunes away.

The portfolios covered include:

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Following the portfolio that suits you is easy as we tell you what to buy, when and where to buy it and importantly how much as well. This way you won’t be caught risking your life savings on some penny dreadful.

The Returns

The returns of the portfolios are based on calendar year performances as shown below. The 2004/05 CFD Portfolio is based on a 17 month performance where as the 2006 CFD Portfolio return is based on a 12 month time frame showing 10 times leverage as CFD's provide,  though we recommend clients adopt a more conservative 3 times leverage.

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CFD Portfolio Returns

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2008 CFD Portfolio - -101.4% (Basis 10 times Leverage) vs (ASX 200 -41.41%)

2007 CFD Portfolio -  +137% (Basis 10 times leverage)

2006 CFD Portfolio -  +315.5% (Basis 10 times leverage)*

2004/2005 CFD Portfolio -  +325.4% (Basis 10 times leverage)

Income Portfolio Returns

2008 Income Portfolio -  -4.74% vs (ASX 100 Accumulation Index -37.32%)

2007 Income Portfolio -  +6.25%

2006 Income Portfolio -  +21.3%

2005 Income Portfolio -  +12.9%

2004 Income Portfolio -  +39.5% (10 month performance)

Mid-Cap Portfolio Returns

2008 Mid-Cap portfolio -  -6.72% vs (ASX Small Ords Index -55.1%)

2007 Mid-Cap Portfolio -  +4.25%

2006 Mid-Cap Portfolio -  +71.29%

2005 Mid-Cap Portfolio -  +20.5%

2004 Mid-Cap Portfolio -  +27.2%

2003 Mid-Cap Portfolio -  +42.8%

* All returns are hypothetical and do not take in to consideration a clients personal circumstances.

*Portfolio calculations do not take into account brokerage or transaction costs.

* The returns reported are provided for information purposes only and results of past performance are no guarantee of future returns. No assurance is given that you will incur any further or future profits or losses. It should not be assumed that you will experience results comparable to those reported above as a number of factors can impact the return achieved on your account, eg. interest rates, different fee structures, leverage, deposit or withdrawal of funds.

To maximise performance, it is critical that the GT Financial Portfolios are exposed to the right asset class at the right time of the investment cycle. Moreover, the weighting (%) assigned to each stock in GT’s portfolio’s will be a function of its position in the investment cycle and potential performance relative to the others. The greater the disparity, the greater probability that funds will be allocated more aggressively to one or two specific stocks. Companies like IBA Health were identified by GT Financial since December 2005 and investors have prospered with the stock gaining 200% over this period. Many of the GT Financial portfolios had significant exposure to such stock picks like IBA Health.

The portfolio selection process has been formulated to tackle each one of these issues with a common goal of maximising performance by concentrating investments to the stocks with the greatest risk-adjusted returns.

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A Graphical Representation Of The Portfolio Selection Process