Cabana Portfolios: Investment Opportunities And Strategies

Cabana is a financial services company that offers investment advice and portfolio management services. The company was founded with the goal of protecting families and loved ones, and it prioritises building trusting relationships with its clients to understand their unique needs. Cabana's investment strategy challenges traditional notions of investment risk and focuses on setting boundaries for risk-taking while limiting drawdown, or the maximum amount an investment can lose during a specific period. The company uses a proprietary algorithm, CARA (Cyclical Asset Reallocation Algorithm), to identify the current stage of the economic cycle and allocate investments to attractive assets. Cabana offers a range of investment products, including ETFs, mutual funds, and separate managed accounts, with a focus on long-term growth and risk management.

Target Income Portfolio

The Target Income Portfolio was released at Cabana in April 2021 for investors seeking a steady stream of income while minimising sequence-of-return risk and overall drawdown through a tactical allocation model. The portfolio seeks a yield in excess of 4%, increasing as interest rates rise.

The Target Income Portfolio uses a semi-active, tactical process whereby Cabana's Cyclical Asset Allocation Algorithm (CARA) seeks to identify macro changes in the economic cycle and allocate investment to assets that perform relatively well at the identified point in the cycle. The portfolio is all-asset and comprised entirely of ETFs. While focused on yield, the portfolio also allows for capital appreciation and is diversified.

The Target Income Portfolio employs Cabana's proprietary CARA algorithm throughout the economic cycle in an effort to mitigate risk and allocate investment to particular assets that are believed to be attractive at any given point. This portfolio is actively managed and targets a current SEC 30-day yield of at least 4%.

The Target Income Portfolio is tailored to the investor, with multiple drawdown variations to meet the needs of investors across risk profiles. Target drawdown percentages range from 5-16%. The portfolio numerically quantifies acceptable levels of risk by identifying a "target drawdown" percentage at the onset of the investment process. The primary goal of the portfolio construction is to minimise losses where possible, especially losses that exceed the applicable target drawdown parameter of each portfolio. This investment philosophy allows clients to remain fully invested at all times, set expectations for loss, and actively participate in favourable market conditions.

Target Drawdown ETFs

The Target Drawdown ETFs are designed to maintain and grow wealth over the long term by clearly defining risk exposure in terms of the maximum expected percentage loss (target drawdown). This allows investors and advisors to align financial goals with the appropriate portfolio.

Cabana's Cyclical Asset Reallocation Algorithm (CARA) plays a crucial role in this process. CARA seeks to adjust each portfolio's risk by using non-correlated and inversely correlated assets, creating the potential for gains across various market conditions.

The Cabana Target Drawdown 10 ETF, for example, seeks to provide long-term growth within a targeted risk parameter. It is an actively managed exchange-traded fund (ETF) that aims to achieve its investment objective with limited volatility and reduced correlation to the overall performance of the equity markets. The fund allocates its assets among five major asset classes: equities, fixed-income securities, real estate, currencies, and commodities. While the Sub-Adviser's target drawdown for this fund is 10%, it is important to note that this target may not always be maintained.

Target drawdown percentages are targets and not guarantees. They refer to the maximum amount an investment in the fund is expected to fall from peak to trough.

Cyclical Asset Reallocation Algorithm (CARA)

Cabana Asset Management's Cyclical Asset Reallocation Algorithm (CARA) is a key component of its investment strategy. CARA is a proprietary model that uses a combination of fundamental and technical data to identify the current stage of the economic cycle. This data includes market cycles, underlying economic conditions, and macroeconomic conditions.

CARA seeks to identify macro changes in the economic cycle and allocate investment to assets that are expected to perform well at that particular point in the cycle. By doing so, CARA aims to provide long-term growth for investors while managing risk. The algorithm is designed to mitigate risk by incorporating inverse and non-correlated asset classes and reallocating investments in response to changing market conditions. This helps to reduce exposure to potential declines and protect investor portfolios during market downturns.

CARA is applied to Cabana's Target Income Portfolio, which was introduced in April 2021. This portfolio is designed for investors seeking a steady stream of income while minimising sequence-of-return risk and overall drawdown. The portfolio targets a yield of over 4%, increasing with interest rates, and is actively managed to maintain a current SEC 30-day yield of at least 4%. It is comprised entirely of ETFs and allows for capital appreciation while being diversified across asset classes.

The Target Income Portfolio is one of the investment options available to Cabana's clients, which include advisors, individuals, and businesses. The algorithm does not take into account the specific situation of each client, so it is the responsibility of investment advisors to determine the suitability of Cabana's strategies for their clients.

Risk-managed investment approach

Cabana Asset Management's investment approach is centred around a risk-managed strategy. This strategy is underpinned by the firm's proprietary Cyclical Asset Reallocation Algorithm (CARA), which identifies the current stage of the economic cycle and allocates investment to assets that are expected to perform well at that point in the cycle.

CARA is designed to mitigate risk by incorporating inverse and non-correlated asset classes and reallocating investments in response to changing macroeconomic conditions. This approach helps to reduce exposure to potential declines and is based on a combination of fundamental and technical data.

Cabana's risk-managed strategy also involves setting clear boundaries for risk-taking and limiting "drawdown", which is the maximum amount an investment can be expected to fall during a specific period. This approach ensures that the firm's returns are based on well-defined objectives and expectations.

The Target Income Portfolio, for example, seeks to provide a steady stream of income while minimising sequence-of-return risk and overall drawdown through a tactical allocation model. The portfolio uses a semi-active, tactical process, aiming for a yield in excess of 4%, increasing with interest rates.

Cabana's disciplined, rules-based strategy seeks to manage expectations, minimise loss, and keep clients invested for long-term success. The firm's investment approach is designed to provide tax-efficient portfolios that are responsive to changes in the macroeconomic cycle while remaining resilient during volatile markets.

Long-term financial goals

Cabana's investment strategy is underpinned by a long-term focus, aiming to deliver consistent, superior performance for investors. The company challenges traditional notions of investment risk and rejects strategies that lack safeguards during market downturns. Instead, Cabana encourages investors to set clear boundaries for risk-taking and seeks to limit "drawdown", or the maximum amount an investment can be expected to lose during a specific period.

Cabana's approach is particularly relevant for those with long-term financial goals, such as retirement planning, as it prioritises wealth preservation and steady growth over time. The company's investment strategy is designed to maintain and grow investor wealth over the long term by clearly defining risk in terms of the maximum expected percentage loss ("target drawdown"). This approach helps investors manage expectations, minimise losses, and stay invested for long-term success.

Cabana's proprietary Cyclical Asset Reallocation Algorithm (CARA) plays a crucial role in achieving these long-term financial goals. CARA uses a combination of fundamental and technical data to identify the current stage of the economic cycle and allocate investments accordingly. By incorporating inverse and non-correlated asset classes, as well as reallocating in response to changing macroeconomic conditions, CARA helps to mitigate risk and improve long-term returns.

The Target Income Portfolio is another example of how Cabana serves investors with long-term financial goals. This portfolio is designed for investors seeking a steady stream of income while minimising sequence-of-return risk and overall drawdown through a tactical allocation model. The portfolio targets a yield of over 4%, increasing with interest rates, and is actively managed to achieve a current SEC 30-day yield of at least 4%.

Cabana's commitment to long-term financial goals extends beyond investment strategies. The company fosters trusting relationships with clients to understand their unique needs and provide tailored services. Whether it's retirement planning, risk management, estate planning, insurance, tax management, or saving for higher education, Cabana's team of financial and legal experts offers comprehensive support to help clients achieve their long-term financial aspirations.

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