Asset Rotation: The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance

PRAISE FOR ASSET ROTATION If you have time to read only one investment book, this should be the one. It will forever change the way you think about investing. Dr. BOB FROEHLICH, bestselling author and Retired Vice Chairman of Deutsche Asset Management Matthew Erickson has set a new standard in formulating the optimal portfolio strategy in this post–crisis world. In essence, a guide–post in staying ahead of the curve, maintaining a disciplined 30,000 birds–eye view, and blocking out the noise that often gets investors into trouble. DAVID ROSENBERG, Chief Economist and Strategist, Gluskin Sheff + Associates Successful investing often comes down to three thingsa sound investment strategy, an unemotional, disciplined implementation of that strategy, and the ability to ignore short–term noise that forever distracts investors from their true long–term goals. Matts book provides readers with the tools to accomplish all three. JAMES P. OSHAUGHNESSY, author of What Works on Wall Street and Chairman CEO, OShaughnessy Asset Management LLC Erickson goes against the trend by going with the trend in Asset Rotation . A fresh, timely read for all investors, Erickson lays the groundwork by exploring timeless investing principles such as the importance of controlling losses and the value of low–cost investing. Challenging conventional portfolio theory, Erickson shows how investor psychology and the burgeoning ETF market form the ingredients necessary to produce dynamic trading strategies designed to produce higher returns with lower risk. JIM BESAW, Chief Investment Officer, GenTrust Wealth Management What distinguishes Matts book from most others is how he provides the reader the tools, process, and examples necessary to operate an investment portfolio using tactical strategies. Matt has provided the reader with what any reader cravesexplanations and answers to untold truths. This is by far one of the best investment strategy books I have ever read. CHRISTOPHER NEUDECKER, JD, MBA, EdD in–progress, Chief Investment Officer and Investment Portfolio Manager Great read! Matthew manages to convey a complicated message into a simple to understand investment theory. From understanding the need and the process to carrying the reader through implementation and execution, this book delivers the necessary tools to establish the investment discipline necessary to be a successful investor. ROBERT ROMAN, President, Managing Partner, Legacy Private Client Group

Preface: We stand on the precipice of an Investment Renaissance Acknowledgments Prologue: David & Goliath Chapter 1 Taking the 30,000–Foot View: Where We Are Today The Individual Investor Ockham’s Razor Our Current Economic Landscape The Bottom Line Chapter 2 When the Paradigm Shifts: Why What Worked In the Past May No Longer Work In the Future A Primer on Modern Portfolio Theory The Treasury Run Losing Money in Bonds The Bottom Line Chapter 3 Shooting Stars: The Performance Realities of Mutual Fund Ownership The Persistence of Manager Performance The Bottom Line Chapter 4 Beyond the Stars: Suggestions for Investment Selection Criteria The Cost of Investing Identifying Risk Assessing the Investment Environment The Bottom Line Chapter 5 The Landscape Has Changed: The Proliferation of the ETF The ETF: What Is It? A Brief History The Use of ETFs in a Portfolio The Bottom Line Chapter 6 Challenging Convention: An Introduction to Asset Rotation A Time–Tested Approach The 2000s The 1990s The 1980s The 1970s The 1960s The 1950s The 1940s The Great Depression From The Great Depression to Today The Bottom Line Chapter 7 Building a Better Mousetrap: Advanced Asset Rotation Building a Better Mousetrap The 1990s The 2000s From 2010 – 2012 23 Years: 1999–2012 Going Toe to Toe with the Best The Bottom Line Chapter 8 Choose Your Own Adventure: Building Your Own Asset Rotation Portfolio Choose Your Own Adventure Additional Factors to Consider: Eligible Risk Assets Additional Factors to Consider: Eligible Flight to Safety / Fixed Income Assets Additional Factors to Consider: Criteria for Investment Selection Creating a Scoring System Required Due Diligence The Bottom Line Chapter 9 The Anatomy of Change: Setting Appropriate Expectations Benchmarking Success The Four Seasons When Equity Markets Rise When Equity Markets Fall When Equity Markets Move Sideways When Equity Markets Move Sideways with Volatility The Bottom Line Chapter 10 Letting Go of Your Crutch: Integrating Asset Rotation into Your Overall Approach Letting Go of Your Crutch Asset Rotation as a Core Approach Baby Steps Supplementing Either Equities or Fixed Income Adopting a Core/Satellite Approach The Bottom Line Chapter 11 The Road Ahead: Real World Solutions for a Changing Landscape The Bottom Line About the Author Index

MATTHEW P. ERICKSON is the CEO and Chief Investment Officer for Renaissance Capital Management, LLC, a boutique investment management firm located in Metropolitan Detroit, Michigan. Concurrently, Matt also serves as the CIO for Legacy Planning Associates, Inc., an affiliated financial planning firm based out of Grand Rapids, MI. Among Matts primary functions is the day–to–day oversight and portfolio management of the firms proprietary investment portfolios. Each of the Renaissance Portfolios are managed in accordance to Matts proprietary systematic and tactical methods of asset management, blending together three stylistically different approaches to investment management, including tactical managed ETF portfolios, opportunistic individual stock portfolios, and traditional Modern Portfolio Theory based allocations with a beta–rotation overlay. By combining these three unique approaches into one overarching portfolio, investors are provided with a higher degree of diversification. Prior to starting his own asset management firm, Matt was a partner in a successful wealth management advisory practice at UBS Financial Services, overseeing more than $350 million in private client assets. Matt and his wife Jill currently reside in Canton, Michigan with their daughter Mackenzie and son Jacob.