NorQuant Multi-Asset

White Paper
Marketing Material

NorQuant Kapitalforvaltning AS, October 2023

Thomas Nygaard, CEO and Portfolio Manager
Contents

1. Introduction 4
2. The Power of Diversification 5
3. Static vs. Dynamic Asset Allocation 7
4. Harnessing Momentum 9
5. Modern Portfolio Optimisation 10
6. Strengths of a Rules-Based ­Investment Strategy 11
7. The Ensemble Edge 12
8. Our Investment Process 13
9. Fund Performance Since Inception 14
10. Advantages of Investing in NorQuant Multi-Asset 19
11. Conclusion and The Road Ahead 20
12. Relevant Research 21

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Executive Summary

NorQuant Multi-Asset was launched January 11, 2021. One month

before we launched the fund, in December 2020, we published
a white paper discussing the theory, research and live test results of the
strategy.

As we approach NorQuant Multi-Asset’s three-year anniversary, we

are proud to present a new white paper revisiting the theoretical
foundations of the strategy, how these were implemented in the fund,
and its exceptional performance since inception.

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1. Introduction
NorQuant Multi-Asset, launched in January 2021, offers a diversified, dynamic
approach to investing. The fund’s strategy systematically allocates its investments
to stocks, bonds, real estate, and commodities across various regions of the world,
adapting to current market conditions and trends.

As we approach its three-year mark, this white paper the sequential steps taken by NorQuant Multi-Asset.
outlines the principles and strategies that have Chapter 9 highlights the impressive results achieved
­guided its journey and performance to date. since inception, demonstrating the strength and
resilience of our approach. In Chapters 10 and 11,
In the chapters that follow, we delve into the we discuss the unique advantages of investing in
­theoretical underpinnings and practical ­aspects NorQuant Multi-Asset and look ahead.
of our rules-based investment philosophy.
­Chapters 2-7 provide a comprehensive e ­ xploration Whether you are already a part of our journey,
of the ­foundational principles that guide our contemplating an investment, or simply seeking to
­approach, ­offering insights into the importance understand more about multi-asset investing, this
of ­diversification, the dynamic nature of asset document aims to offer a clear and ­comprehensive
­allocation, and the role of momentum, volatility, understanding of how NorQuant Multi-­Asset
and correlation in portfolio construction. Chapter 8 ­operates. Join us in exploring the approach,
showcases the i­mplementation of these principles ­methods, and results that define our fund.
into our systematic investment strategy, detailing

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2. The Power of Diversification
One of the foundational tenets of modern portfolio theory is the principle of
­diversification. By holding a diverse portfolio of individual stocks, investors can
capitalize on the benefits of diversification.

The primary advantage of this approach is the A Portfolio of Global Indices

­mitigation of firm-specific risks. While ­individual Across Asset ­Classes
stocks may exhibit significant volatility due to To achieve an even higher level of diversification,
­company-specific events or sectoral shifts, by investors might consider expanding their hori-
­holding a diversified portfolio, the impact of any zons beyond a single asset class or region. By
single stock’s under­performance on the overall port- ­incorporating a mix of global indices representing
folio is minimized. As a result, investors can achieve various asset classes like stocks, bonds, real estate,
a smoother, more predictable return profile, while and ­commodities, investors can tap into the diverse
potentially enhancing the risk-adjusted returns. performance drivers of these assets. Different asset
classes react differently to macroeconomic events,
Investing in Index Funds interest rate changes, and geopolitical shifts. By
Taking diversification a step further, investors can diversifying across these, the portfolio becomes
consider index funds. These funds track a b ­ roader resilient to a wider range of economic scenarios.
market index, such as the S&P 500, allowing ­Furthermore, global diversification allows investors
­investors to gain exposure to a large number of to benefit from growth opportunities in emerging
stocks in a single investment. The inherent diversity markets and reduces the risk associated with any
in these indices reduces the volatility associated with single regional economy. Combining these less
individual stocks. Moreover, index funds often come correlated investments in a portfolio mitigates risk
with lower management fees than actively managed and paves the way for potentially higher and more
portfolios, making them a cost-effective solution for consistent returns.
broad market exposure. An additional benefit is the
elimination of the risk of ­significantly underperform- In summary, diversification, when executed
ing the market, which can be a c­ oncern with stock ­systematically across stocks, indices, and global
picking or active management strategies. ­asset classes, offers a compelling strategy for risk
mitigation and return optimization. Professional
investors would do well to consider the layered
benefits of such an approach in their investment
strategies.

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3. Static vs. Dynamic Asset Allocation
Static Asset Allocation Simplicity: Fixed asset allocations are straight­
Historically, the investment community has leaned forward, easy to understand, and communicate,
heavily towards a static asset allocation approach. making them appealing for both investment profes-
This method involves setting a fixed percentage sionals and their clients.
of portfolio assets in various categories, such
as e­ quities, bonds, and alternative assets, and Institutional Inertia: Institutions with substantial
­periodically rebalancing to maintain these propor- assets under management often find it challenging
tions. Reasons for this inclination include: to make frequent allocation shifts. A static approach
offers a stable framework in line with institutional
Tradition: Over time, certain fixed allocations, decision-making processes.
like the 60/40 equity to bond ratio, have become
benchmarks due to their historical performance and
­resilience across varied market conditions.

Chart 1: Diverging Yearly Returns of 8 ETFs (2005-2023)

Highlighting the unpredictability of financial markets, this chart shows the varying yearly returns of 8 ETFs representing different
assets, illustrating how the choice of asset class plays a crucial role in determining investment returns and underscores the importance
of ­strategic diversification.

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The Case for Dynamic Asset Allocation Unstable Volatilities: Volatility, a key determinant
While static allocations have their merits, the in risk assessment, is not fixed. Its variation impacts
­inherent dynamism of financial markets challenges the risk-return dynamics of an investment portfo-
the notion of fixed allocations. Returns, volatilities, lio. Chart 2 demonstrates the wide fluctuations in
and correlations - the three pillars of asset allocation ­volatility across major assets over the same period.
as laid out in Markowitz’s Modern Portfolio Theory -
are not constants but fluctuate over time: Shifting Correlations: The relationships between
asset classes are not always stable over time but
Fluctuating Returns: Asset class returns can can change, altering the diversification benefits of a
vary widely over different periods, challenging the portfolio. Chart 3 depicts the fluctuating correlations
assumptions of static allocations. Chart 1 illustrates between major asset classes over time, underscor-
this variability by showing the divergent annual ing the importance of a dynamic approach to asset
returns of various asset classes over the past 18 allocation.
years.

Chart 2: Volatility Fluctuations of 8 Major Assets (2005-2023)

Illustrating the fluctuating volatility of eight major assets, as representet by major ETFs, this chart underscores the dynamic nature of
financial markets and the importance of continuous risk management.

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 The Dominance of Asset Allocation in offers the potential for better risk-­adjusted
­Investment Results ­performance. By being flexible and responsive to
One of the seminal revelations in investment market dynamics, dynamic asset allocation can
­management is the overwhelming influence of ­better position portfolios to capture opportunities
asset allocation on a portfolio’s performance. and mitigate risks.
­Numerous studies underscore that the choice of
asset ­allocation significantly overshadows the effects In conclusion, while static asset allocation ­strategies
of individual security selection within an asset class. have historical merit, the intricate and evolving
In essence, getting the ”big picture” right - deciding nature of financial markets calls for a more ­adaptive
how much to allocate to equities versus bonds, for approach. Recognizing the dominant role of ­asset
example—is often more consequential than s­elect- allocation in determining investment results
ing specific stocks or bonds within those categories. ­underscores the need for a method that can fluidly
adjust to market realities. Dynamic asset a­ llocation,
Given the paramount importance of asset allocation, with its emphasis on adaptability, emerges as a
a dynamic approach, which adapts to the changing ­compelling strategy for navigating the complex
parameters of returns, volatilities, and c­ orrelations, ­investment landscape.

Bond - Commodity Commodity - Real Estate Equity - Commodity

Bond - Real Estate Bond - Real Estate Bond - Real Estate

Equity: ACWI-US. Bond. BWX-US. Cimmodity: DBC-US. Real Estate: RWO-US

Chart 3: Correlation Changes Between 4 Asset Classes (2005-2023)

This chart reveals how correlations between major asset classes fluctuate over time, demonstrating the significance of an adaptive
approach to portfolio construction to maintain diversification benefits.

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4. Harnessing Momentum
In the field of portfolio optimization, three essential parameters emerge: return,
volatility, and correlation.

Predicting returns is very challenging due to the and entire asset classes. Specific sectors or ­regional
inherent efficiency of markets, which severely limits markets, riding on their recent successes, may
opportunities for consistent outperformance. Yet, a ­exhibit continued positive performance.
significant exception in this scenario is the momen-
tum effect. This phenomenon, consistently observed When considering a spectrum of asset classes,
across markets and thoroughly documented in ­momentum strategies could involve strategic
a vast amount of academic papers, provides an ­rotations among equities, bonds, commodities, and
­intriguing avenue for potentially enhancing returns. real estate, all predicated on their relative recent
performance. This approach not only capitalizes
Momentum in Stocks on prevailing economic trends but also offers the
Momentum, as an investment principle, identifies potential for relative outperformance. For example,
the proclivity of stocks that have recently performed equities might be the preferred choice during robust
well to continue their upward trend, while the economic growth, while bonds or other defensive
­converse is true for those that have lagged. This assets might gain prominence during economic
trend, prevalent across various markets and time- contractions.
frames, offers a structured approach for ­investors.
By aligning investment decisions with recent In conclusion, momentum, whether at the stock,
­performance trends, one can potentially benefit index, or asset class level, offers a nuanced and
from this momentum dynamic. Behavioral factors, potentially rewarding approach to investing.
such as investor reactions to new information and By ­understanding and judiciously leveraging
prevailing market sentiments, often underpin this ­momentum, investors can craft strategies that are
momentum effect. both responsive to market dynamics and aligned
with broader investment goals.
Momentum in Indices and Asset Classes
Beyond individual stocks, momentum can also be
discerned at broader levels, encompassing indices

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5. Modern Portfolio Optimisation
After our exploration of momentum as a cornerstone in portfolio optimization,
it’s paramount to shift focus to the other two integral parameters: volatility and
­correlation.

Together with momentum, which aids in identify- Utilizing these short-term estimates in minimum
ing assets with high expected returns, volatility and variance optimization offers:
correlation form the backbone of optimal portfolio
construction. Let’s delve deeper into the nuances of Current Market Resonance: Portfolios are tailored
forecasting and leveraging volatility and correlation to the prevailing market conditions, aiming for better
for optimal results. risk-adjusted outcomes.

While financial markets often display ­unpredictability Dynamic Risk Management: With a focus on
in directional movements and returns, ­discernible minimizing volatility, portfolios remain adaptive to
patterns emerge in the realms of volatility and evolving market risks.
correlation, particularly in the short term. Empirical
studies indicate the presence of volatility clustering, Efficient Portfolio Design: Prioritizing recent data
where high volatility phases often precede similar reduces potential errors, leading to more accurate
volatile intervals and vice versa for tranquil periods. and risk-attuned portfolio structures.
Similarly, asset correlations are subject to change
over time, influenced by evolving market dynamics In summation, while no estimation technique
and macroeconomic developments. Factors such ­guarantees perfection, leveraging short-term
as shifts in monetary policy or geopolitical events ­historical data for discerning volatility and
can lead to varied responses across different asset ­correlations can provide a sturdy foundation for
classes or regions, or alternatively, cause them to portfolio crafting. Melding this with minimum
move more in sync. variance ­optimization principles yields portfolios
that are attuned to current market dynamics and
Using short-term history (typically spanning 1 to primed for risk containment. Such a nimble, data-­
6 months) for estimating volatility and correlation centric ­methodology presents a robust alternative
­provides a contemporary and efficient snapshot, to ­traditional, longer-term anchored investment
capturing the pulse of the current market dynamics. ­strategies.

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6. Strengths of a Rules-Based ­
Investment Strategy
A rules-based investment strategy, grounded in established financial principles
and academic research, offers a structured approach to asset management. By
eschewing discretionary judgments in favor of predefined rules, such a strategy
brings forth several salient advantages:

Consistency and Reduction of Emotional Bias: Backtesting Capability: A rules-based strategy

By ­ensuring investment decisions are made provides the advantage of being backtested on
­consistently, regardless of market conditions, a historical data. This allows for an evaluation of
rules-based approach minimizes the influence of the strategy’s performance and robustness across
emotions and behavioral biases. This fusion of logic different ­market conditions and periods, lending
and structure leads to more predictable and stable further credibility and insight into its potential future
investment outcomes. ­performance.

Research: Rooting the strategy in established finan- Transparency: Employing a predefined set of rules
cial principles ensures its foundation in time-tested renders the investment process transparent and
methodologies. This synergy with academic insights easy to communicate. Investors gain clarity about
marries theoretical soundness with practical applica- the mechanics behind portfolio allocations, fostering
tion. trust and understanding.

Efficiency: With set rules in place, the investment In summary, a rules-based investment strategy
process can be largely automated, leading to offers a concise and streamlined approach to asset
­operational efficiency. This streamlining reduces management, adeptly combining empirical research
the time and resources required for investment with the practicalities of the financial world.
­decisions and execution.

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7. The Ensemble Edge
The Problem of Data Mining in Investment
­Strategies:
While a rules-based strategy has strong a ­ dvantages,
the design of rules-based strategies also carries
the major risk of data-mining. In the realm of
­quantitative finance, data mining refers to the
practice of sifting through vast amounts of data in
search of patterns or relationships, often without a
prior hypothesis. While this might sound benign or
even advantageous, it presents a significant pitfall:
the risk of identifying spurious patterns that ­appear
­significant purely by chance. When investment
­strategies are built upon these chance occurrences,
they can be destined to underperform in out-of-
sample testing or real-world application because
the identified patterns are not grounded in any
­fundamental or economic rationale. Reduced Portfolio Volatility: With the
­diversification of signals, the portfolio is less ­likely
Advantages of an Ensemble Approach to make extreme allocation shifts based on the
An ensemble approach involves combining multiple ­recommendation of a single model. This can lead to
models or signals to make investment decisions. In lower portfolio volatility, as the ensemble approach
the context of momentum signals and volatility and is less reactive to individual signal noise.
correlation estimates for a multi-asset portfolio, this
means utilizing various models, perhaps derived Lower Turnover: Frequent portfolio rebalancing,
from different methodologies or time horizons, driven by rapidly changing signals, can lead to high
and aggregating their insights to guide portfolio turnover. An ensemble approach, by virtue of its
­allocation. Here are the advantages of such an aggregated insights, tends to exhibit more gradual
­approach: shifts in asset allocation. Lower turnover leads to
lower trading costs and slippage.
Mitigation of Data Mining Risks: By combining
multiple signals, the ensemble approach dilutes Increased Returns: The combined effects of more
the impact of any single spurious pattern or overfit reliable, stable returns and reduced costs can
model. If one model has inadvertently capitalized on ­contribute to enhanced portfolio performance over
a chance pattern, its influence is moderated by the the long term.
other models in the ensemble.
In conclusion, an ensemble approach to momentum
Stability of Returns: Ensembles tend to pro- signals and volatility and correlation estimation in
duce more stable and consistent results. While multi-asset portfolios offers a robust and adaptive
an i­ndividual model might go through periods investment strategy. By leveraging the collective
of ­underperformance, the aggregated insights insights of multiple models, it addresses the pitfalls
of ­multiple models can smooth out these rough of data mining, ensures a more stable return profile,
­patches, leading to a more stable return profile. and optimizes for cost efficiency.

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8. Our Investment Process
Building on the concepts and investment philosophy discussed in Chapters 2-7, and
combining thorough research with practical asset management, we developed a
rules-based strategy for our fund, NorQuant Multi-Asset. In this chapter, we outline
the fund’s investment process, detailing each step in the sequence.

Data Aggregation: The initial phase involves Portfolio Optimization: The fund then ­engages
­collecting extensive data on a wide range of i­ndices, in Minimum Variance Optimization, using the
encompassing equities, bonds, real estate, and ­algorithm’s estimated volatilities and correlations
commodities from various geographical regions. to construct a portfolio aimed at maximizing risk-­
This data serves as the primary input for the fund’s adjusted returns.
algorithm.
Monitoring & Monthly Rebalancing: The fund
Momentum Selection: Using historical price adheres to a monthly rebalancing schedule. We
data, NorQuant’s proprietary momentum models have found that this interval strikes a good balance
rank and select indices exhibiting strong momentum between adapting to significant market develop-
for inclusion in the portfolio. ments—such as changes in return, volatility, or cor-
relation dynamics—and not reacting to short-term
Volatility and Correlation Estimation: Once the noise. Monthly rebalancing ensures that the port-
indices for inclusion in the fund’s portfolio have been folio remains consistently aligned with its strategic
selected, NorQuant’s proprietary models use recent objectives and risk profile.
historical data of these indices (typically spanning
1-6 months) to estimate volatility and correlation In essence, NorQuant Multi-Asset’s strategy
metrics. ­combines academic insights with pragmatic asset
management. Its systematic, algorithmic process has
resulted a clear, repeatable, and robust investment
Engelsk versjon
methodology.

Commodities

Real estate

Bonds

Equities

Global Assets Representative ETF’s Proprietary Proprietary

Momentum Ranking Portfolio Optimisation

Chart 4:
A Simplified Visualization of NorQuant Multi-Asset’s Systematic, 100% Rules-Based Investment Process.

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9. Fund Performance Since Inception
The NorQuant Multi-Asset Fund is on the cusp of celebrating its three-year
­anniversary, a significant milestone that qualifies it for a Morningstar r­ ating -
a prerequisite sought by many institutional investors.

Although the precise rating remains to be seen, the In the landscape of Norwegian balanced funds with
exceptional performance of the fund bodes well moderate risk profiles, NorQuant Multi-Asset stands
for a favorable evaluation. If the fund continues its out with its robust results. Moreover, the fund’s
­current trajectory of performance over the next performance is noteworthy even when compared to
­couple of months, a top rating of four or five stars a wider array of European, US, and global balanced
could very well be within reach. funds.

NorQuant Multi-Asset has exhibited a strong track Illustrated in Chart 5, the fund’s ascent since its
record over the past three years, delivering a nearly launch in January 2021 is marked by outperforming
30% total return, which translates to an impres- its benchmark—a balanced mix of 50% global stocks
sive annualized rate of approximately 9-10%. This and 50% global bonds. Chart 6 further ­positions
robust performance has been accompanied by a NorQuant Multi-Asset among the leading funds
well-­managed volatility profile around 10%, and a when compared to a selection of about 15 t­ actical
Sharpe ratio close to 1, based on a risk-free rate of asset allocation ETFs, emphasizing its s­ uperior
zero percent. This blend of high returns and moder- risk-adjusted performance. These outcomes are
ate volatility underlines the fund’s proficient risk-ad- a testament to the fund’s strategic precision in
justed strategy. ­navigating market conditions to deliver compelling
returns for its investors.

Chart 5: NorQuant Multi-Asset’s Performance vs. Benchmark Since Inception

This chart illustrates NorQuant Multi-Asset’s robust return of approximately 30% since its inception on January 11, 2021, significantly
outperforming the benchmark— a 50/50 global equity/bond index in NOK—by around 15%.

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 Annualized Volatility Return.
Volatility in NOK and Sharpe Ratio using Rf = 0% - sample from 2021-01-12 to 2023-09-20

Chart 6: Performance Comparison with Tactical Asset Allocation ETFs

This chart positions NorQuant Multi-Asset among the top performers when compared to 15 tactical asset allocation ETFs, highlighting
the fund’s impressive risk-adjusted returns, with a simplified Sharpe ratio close to 1 and a low volatility.

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A detailed chart from Morningstar, Chart 7, financial theory suggesting that actively managed
enhances our understanding of NorQuant Multi-As- funds often fall short of benchmarks after expenses.
set’s performance. It demonstrates how the fund
measures up against its Norwegian counterparts Furthermore, Chart 8 provides a glance at the
that share a moderate risk profile, as well as against rolling annualized 21-day volatility, comparing
a Morningstar-selected benchmark composed of NorQuant Multi-Asset to the Oslo Stock Exchange,
a balanced 50/50 allocation between global stocks the reference index, and an array of diverse asset
and Norwegian bonds. The fund’s performance is classes. This visualization underscores the fund’s
illustrated as significantly surpassing this bench- achievement of maintaining low and stable volatility
mark, while the average outcome of the peer group since its inception, a testament to the robustness
trails, highlighting the outperformance of NorQuant of our investment approach even amidst market
Multi-Asset. This difference aligns with the prevailing ­fluctuations.

NorQuant Multi-Asset Benchmark Similar funds

Chart 7: Comparative Performance Since Inception

This chart showcases NorQuant Multi-Asset’s steady climb to a 30% cumulative return since January 2021, outperforming both its
benchmark and a Morningstar-selected peer group of similar funds.

Rolling Annualized of 21 days Volatility - Return in NOK

Chart 8: Volatility Comparison Since Inception

This chart showcases NorQuant Multi-Asset’s low and stable volatility in comparison to the Oslo Stock Exchange, its reference index,
and a variety of major global assets, illustrating the fund’s consistent performance stability since its launch.

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Chart 9 captures the fund’s strategic adaptability the boom subsided, culminating in a complete
in asset allocation, with a month-by-month break- ­divestment from this asset class by early 2023.
down of investments in stocks, bonds, c­ ommodities,
and real estate since inception. The fund’s initial During 2022, the fund tactically reduced its stock
strategy favored a heavy tilt towards stocks, with ­allocation to around 25%, a year when both stock
­approximately 75% allocation, complemented and bond markets showed poor returns. H ­ owever,
by a modest investment in commodities. As the by identifying an appreciating dollar, the fund
­commodity markets surged in the spring and ­strategically invested exclusively in USD bonds,
­summer of 2021, the fund increased its exposure showcasing its nimble asset allocation strategy.
to these markets, significantly enhancing returns. In 2023, the allocation to stocks was ramped up
The chart further illustrates the fund’s responsive again to over 70%.
strategy as it reduced its commodities stake when

Stocks Real-Estate Commodities Bonds

Chart 9: Asset Allocation Journey Since Inception

This chart provides a month-by-month visualization of the fund’s strategic adaptability in allocating investments across stocks, bonds,
real estate, and commodities since its inception, showcasing the fund’s ability to dynamically adjust to market conditions.

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 The last two charts, 10 and 11, show the fund’s In summary, the charts and asset allocation
capability to harvest returns from diverse asset ­narrative underscore the strategic agility and
classes and different regions of the globe. This ability ­performance resilience of the NorQuant M ­ ulti-­Asset.
to tactically shift allocations and tap into lucrative Its proven capability to adapt to v­ arying m
­ arket
opportunities across asset classes and geographies, conditions and capitalize on emerging opportuni-
especially during challenging market scenarios, ties across a spectrum of asset classes and r­ egions
underpins the fund’s adeptness in risk-adjusted resonates with the core principles of ­dynamic asset
­performance optimization. allocation, promising a conducive avenue for robust
risk-adjusted returns as the fund propels towards its
next operational milestone.

NorQuant Multi-Asset A -
Teoretisk avkastning basert på valutakursen ved slutten av måneden uten handelskostnad

Stocks Real-Estate Commodities Bonds

Chart 10: Monthly Return Attribution by Asset Class

This chart breaks down the fund’s monthly returns, illustrating the contribution of each asset class—stocks, bonds, real estate, and
commodities—to the overall performance, and highlighting the fund’s capacity to generate returns from different asset classes.

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 NorQuant Multi-Asset A -
Teoretisk avkastning basert på valutakursen ved slutten av måneden uten handelskostnad

Asia Emerging markets Europe Global Japan USA

Chart 11: Monthly Return Attribution by Region

This chart provides a detailed view of the fund’s monthly returns, categorized by region, showcasing how investments in various parts
of the world have contributed to the overall performance. It highlights the fund’s ability to tap into lucrative opportunities across
­different global regions.

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10. Advantages of Investing in
NorQuant Multi-Asset
NorQuant Multi-Asset offers a practical solution for today’s financial ­environment.
Here are the key benefits that distinguish this fund.

Demonstrated Performance: Long-Term Synergy:

Stable, Strong Returns: Since its inception ­nearly While short-term market movements can be
three years ago, NorQuant Multi-Asset has ­unpredictable, the long-term adaptive approach
­consistently delivered robust returns. These returns of NorQuant ensures that it remains in harmony
are not just impressive in absolute terms, but also with broader market trends, making it a reliable
when adjusted for risk, showcasing the fund’s ability ­component of any long-term investment strategy.
to offer superior risk-adjusted performance.
In Conclusion:
Dynamic and Adaptive Allocation: Investing in NorQuant Multi-Asset offers a blend
No Discretionary Adjustment Needed: The fund’s of stability, diversification and adaptability. Its
underlying strategy is adaptive by design, eliminating consistent performance, coupled with its ability to
the need for discretionary tweaks to asset allocation. navigate a broad spectrum of market conditions,
This ensures that the portfolio remains optimized makes it a compelling choice for investors seeking a
without manual interventions, offering investors a ­resilient and dynamic investment vehicle. Whether
hands-off, effective investment solution. as a s­ tandalone investment or as a complementary
Tailored for All Market Conditions: Whether it’s addition to a diverse portfolio, NorQuant Multi-­Asset
unconventional periods characterized by muted stands as a testament to the synergy of rigorous
equity returns, surges in commodities, regional/ research and practical asset management.
currency-specific momentum, or changes in asset
­volatilities and correlations, NorQuant Multi-Asset
remains responsive. The fund’s strategy ensures
it can navigate and potentially benefit from both
­conventional and “abnormal” market conditions,
making it a versatile player in diverse market
­scenarios.

Complementary to Diverse Portfolios:

Low Correlation with other Investments: The
­adaptive nature of NorQuant Multi-Asset means
it often exhibits a relatively low correlation with
many other investment types. This makes it an ideal
addition to a diverse portfolio, offering a layer of
­diversification that can enhance overall portfolio
returns while potentially mitigating risks.

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11. Conclusion and The Road Ahead
The NorQuant Multi-Asset fund is a result of merging time-tested financial
­principles with modern market practices. By integrating academic findings with
real-world data, the fund offers an investment strategy that is sound in theory and
effective in practice.

A Systematic Dedication to Financial Theory: Looking Ahead:

The fund represents a balance between classical The NorQuant Multi-Asset fund is prepared for the
financial knowledge and current market insights. future. Our strategy is based on extensive financial
This combination provides a unique investment research and vast market data. Given the depth
­approach, merging the best aspects of both of this foundation, we trust in the longevity and
­academic theory and practical market experience. ­effectiveness of our approach and see no need for
The fund’s systematic, rules-based approach ensures major adjustments in the foreseeable future.
that investment decisions are precise and consistent,
focusing on achieving stable risk-adjusted returns. In Closing:
The NorQuant Multi-Asset fund stands as a
Addressing the Challenge of Prediction: ­representation of thorough research and commit-
A key aspect of the NorQuant Multi-Asset fund ment to excellence. We invite investors to ­experience
is its approach to handling market uncertainties. the benefits of a fund that is both academically
While market movements are influenced by various ­grounded and practically responsive.
­factors like economic trends and geopolitical events,
the fund operates on the principle that markets
­efficiently process changing information. Instead of
trying to predict these changes, our strategy uses
market data to build a portfolio aimed at optimal
returns for the level of risk taken.

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12. Relevant Research
Asness, C. S., Moskowitz, T. J., & Pedersen, L. H. (2013). Jegadeesh, N., & Titman, S. (1993). Returns to Buying
­Value and Momentum Everywhere. ­Journal of Finance, Winners and Selling Losers: ­Implications for Stock Market
68(3), 929–985. Efficiency. The Journal of F­ inance, 48(1), 65–91.
https://doi.org/10.1111/jofi.12021 https://doi.org/10.1111/j.1540-6261.1993.tb04702.x
For NorQuant Multi-Asset, the universality of This research bolsters NorQuant’s strategy of
­momentum across assets is paramount. The study ­favoring high-performing ETFs and a ­ djusting
validates our fund’s core strategy of h ­ arnessing ­allocations away from underperformers. Such
­momentum effects across ETFs representing a proactive approach, backed by empirical
­different asset classes. ­evidence, ensures that our fund remains agile and
­performance-driven.
Carhart, M. M. (1997). On persistence in mutual fund
­performance. 52(1), 57–82. Markowitz, H. (1952). PORTFOLIO SELECTION. The Journal
https://doi.org/10.1111/j.1540-6261.1997.tb03808.x of Finance, 7(1), 77–91.
The four-factor model introduced by Carhart offers https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
NorQuant Multi-Asset a refined lens through which Markowitz’s principles of diversification and
to analyze ETF returns. Specifically, the ­momentum ­portfolio optimization resonate deeply with
factor can serve as a critical component in our NorQuant M ­ ulti-Asset’s commitment to achieving
rules-based approach, ensuring that our strategy is the best r­ eturn for a given risk level. By leveraging
aligned with established academic insights. these ­principles, our fund ensures that alloca-
tions ­between ETFs are made with a clear focus on
Engle, R.F. (1982) Autoregressive C ­ onditional ­minimizing variance, in line with our fund’s objec-
­Heteroskedasticity with Estimates of the ­Variance of tives.
United Kingdom Inflation. E ­ conometrica, 50, 987-1007.
https://doi.org/10.2307/1912773 Moskowitz, T. J., Ooi, Y. H., & Pedersen, L. H. (2012). Time
Volatility prediction, as modeled by Engle’s ARCH, series momentum. Journal of Financial E ­ conomics, 104(2),
is instrumental for NorQuant Multi-Asset’s risk 228–250.
­management. By anticipating and navigating https://doi.org/10.1016/j.jfineco.2011.11.003
­volatility in our ETF selections, we ensure that our The robustness of time series momentum across
portfolio remains resilient, adhering to our minimum various asset classes, as outlined in this paper,
variance mandate. underpins NorQuant Multi-Asset’s core strategy
of capturing momentum premiums across ETFs
Geczy, C., & Samonov, M. (2015). Two Centuries of ­representing different asset classes.
Multi-­Asset Momentum (Equities, Bonds, ­Currencies,
­Commodities, Sectors and Stocks). Pedersen, L. H., Babu, A., & Levine, A. (2020). ­Enhanced
In SSRN. Portfolio Optimization. SSRN E ­ lectronic Journal.
https://doi.org/10.2139/ssrn.2607730 https://doi.org/10.2139/ssrn.3530390
The longevity of momentum effects, spanning two This paper provides an advanced framework for our
centuries, underscores the robustness of NorQuant’s mean-variance approach, particularly in accurately
momentum-based approach. This h ­ istorical gauging risk-return estimates.
­perspective ensures that our fund’s d ­ ynamic
­allocation to various asset class ETFs has a solid
­empirical ­foundation.

Jegadeesh, N. (1990). Evidence of Predictable Behavior of

Security Returns. The J­ ournal of Finance, 45(3), 881–898.
https://doi.org/10.1111/j.1540-6261.1990.tb05110.x
Jegadeesh’s findings affirm NorQuant Multi-Asset’s
methodology of monthly rebalancing. By r­ ecognizing
and acting on the predictable patterns in asset
­returns, our fund is positioned to capitalize on short-
term momentum, enhancing portfolio performance.

22 NORQUANT MULTI-ASSET WHITE PAPER, OCTOBER 2023

Questions?
Feel free to contact:

Thomas Nygaard
CEO / Portfolio Manager
Mobile: +47 991 22 033
E-mail: tn@norquant.no

For more information: www.norquant.no

23 NORQUANT MULTI-ASSET WHITE PAPER, OCTOBER 2023

Disclaimer
NorQuant Kapitalforvaltning AS is a securities firm (org.nr. 922 652 007) and NorQuant
with a license from The Norwegian Financial Services ­Kapitalforvaltning AS (org.nr. 822 651 992). The
Authority (Finanstilsynet) to provide the following information is not to be regarded as advice or
services: ­recommendations on the purchase or sale of
financial instruments or securities. None of the
Investment services and activities, Securities Trading companies assumes r­ esponsibility for actions
Act § 2-1 (1) taken on the basis of information on these pages.
All investments involve risk, and such decisions
No 1: Reception and transmission of orders in are taken independently and at your own risk. The
­relation to one or more financial instruments information on these pages should not be used
No 4: Portfolio management as a s­ ubstitute for the professional advice that
­individuals or ­companies may need. The c­ ompanies
3. Ancillary services, Securities Trading Act § 2-1 (2) do not g­ uarantee that the information in the
No 5: Preparation and provision of investment ­presentation is precise or c­ omplete. Please note
­recommendations, financial analyses et al. that the ­information may have changed since the
­preparation of the presentation.
NorQuant AS is registered in the Norwegian
­Register of Business Enterprises (Brønnøysund­ For more information about the fund, see the fund’s
registeret) with organisation number 818 624 212, fact sheet and information brochure on our website:
with daughter companies NorQuant Technology AS www.norquant.no

Past performance is no guarantee of future returns.

The capital invested in the fund can both increase and
decrease in value, and there is no guarantee that you will get
back all of the invested ­capital. We recommend that you read
the fund’s fact sheet, ­information brochure and fund terms
and conditions before investing.

24 NORQUANT MULTI-ASSET WHITE PAPER, OCTOBER 2023