In any month, one security or fund has the highest return. We call the time series of this 'MaxReturn'. (For any portfolio strategy screened by criteria, this will be different.) A return is analogous to a risk, just as price and yield have the same meaning for bonds. That portfolio manager got the Risk Decision correct for that month.

We've been researching how to predict this Risk Decision for 20 years. We've solved the Risk Prediction problem by developing our Macro Economic model, and applied it to create eCIO4. eCIO4 uses Macro inputs to produce a Risk Target to construct a portfolio. The Risk Targets are derived from 10+ Macro Economic environmental variables, many of which are proprietary.

Our goal is to construct portfolios whose returns approach 'MaxReturn'.

eCIO 4.1 is our current Macro Economic Risk Targeting algorithm. It answers the question "What Risk should a CIO use to construct a portfolio in the current environment". It does this monthly, without biases.

Our systematic portfolio construction is top down, using Risk Targeting. Our quant techniques "factorize" 1000+ ETF portfolios into risk and return parameters for portfolio construction.

Our portfolio construction using Risk Targeting is a new paradigm in finance and investing. This forms the missing connection between Economics and Investing.

The resulting model portfolios go well beyond bottom-up Trad-Fi(nance), in concept and in returns.

We no longer look below us at the returns of Trad-Fi benchmarks (AGG, S&P, etc.). We look up, and aspire to the potential MaxReturns that are possible in any set of asset classes or strategies. eCIO 4.1 is the first step.

Trad-Fi owns individual securities, and its bottom-up Risk DNA biases to liquid and 'safe' assets (UST, IG, Large Cap Equities), using techniques of security selection and diversification for risk management, and fears other asset classes. Trad-Fi has not recognized recent improvements in liquidity, and is based on a presumption of illiquid markets.

With ETFs, liquidity is greater than the underlying assets, opening up portfolios to new risk and return options, facilitating Active Management.

We recommend a Risk-Parity-like global asset set, as liquidity is no longer a constraint. Frequent rebalancing manages portfolio Risk and generates the Alpha, which is demonstrated in our Fact Sheets. We also construct portfolios with a more concentrated asset set - US Bonds, US Equities, etc. This is customizable.

ECIO 3.6 Models - these are here to provide continuity and comparisons, and to demonstrate the order-of-magnitude improvements in the new models. These are based on our prior Risk Models, that targeted the risk of specific benchmarks (AGG, S&P, Risk-Parity).

They are not shabby, and are much better than the performance of Trad-Fi portfolios.

But the eCIO 4.1 Risk Targeting is way better, and is the future, and the eCIO 3.6 portfolios are being replaced.