What is a Fund Rotation Model?
Fund Rotation Models hold a portfolio of one, two, three or four equities at a time from a specific population of candidate equities. The number of candidates usually ranges from 3 to 100. Typically, as the number of equities held at a time increases, the risk and returns decrease when all other variables are held constant. Computer-driven decision rules select the best performing equities to buy and determine when current holdings need to be rotated to better performing candidates. Timing signals are usually employed to determine when all holdings should be rotated to the safety of money market funds and when all money market funds should be reinvested.
