Among the many benefits the naaim organization offers, one of the most significant is

our conferences. it’s the best oppor-tunity you will find to network with other active investment managers who share your investment philoso- phy and face many of the same challenges you face. many first-time naaim conference attendees have commented on how energizing and

exceptional a naaim conference is, making attending outlook 2015 - an absolute must. if you are not yet a naaim member, join now and attend outlook at the membership price (a $200 savings) anD, your membership benefits are extended through December 2016! make plans to be at the Dallas/fort Worth airport marriott november 2-3.

here is why i will be attending. i look forward to seeing old friends at outlook 2015, among both members and our sponsors. but also, i will be attending with the objective of building my firm’s practice by asking the right questions and learning from others.

this is a challenging time for the investment advisory business, from managing volatile financial markets to lever-aging new technologies, while reaching prospective clients and keeping existing ones—as well as anticipating the future trends and demands of our businesses for the next 5, 10, or 15 years. individually, we may not have all the answers, but as a group we are a fantastic resource.

the 2015 outlook agenda chair, Ken graves, has more about the format of outlook 2015 on page 2. you will find hotel reservation information and registration details there as well. Don’t let this conference pass you by—make your plans today!

in my first letter as President, i briefly outlined the value proposition of naaim. While the outlook Confer-ence is currently front and center, i would like to highlight a few of naaim’s programs that every member should use to their advantage.

naaim members have several ways to gain visibility:

1.NAAIMWagnerAwardwhitepaperCompetition–inits eighthyear

• advance the practice of active management by authoring a professional paper and potentially winning the $10,000 first place award or one of the secondary cash prizes

• expand your active management expertise through the huge store of knowledge - 107 papers available as part of your membership, posted in the naaim Community Resources board

Trading STraTegieS

Understanding the Difference Between a Correction and the Start of a Recession .............................................8

PraCTiCe ManageMenTPerformance Transparency Benefits Everyone .......................................10

naaiM newS

President’s Letter ...................................................................................1Outlook 2015 – Focused on Catalyst Driven Growth and

Interactive Sessions ...........................................................................1Discover CATALYSTS that Will Transform Your Business

at Outlook 2015 ...............................................................................2Meet the Outlook Presenters .................................................................3Round Table Discussions Bring Peer-to-Peer to the Forefront ...................4Introducing the Outlook 2015 Sponsors ................................................4New Sponsorship Opportunities Open in 2016 ......................................4Outlook 2015 Conference Agenda ........................................................6Shark Tank Preliminaries ........................................................................6NAAIM Signature Program Updates ....................................................13October 15 is Deadline for 2016 Charles H. Dow Award

Research Outlines ............................................................................13

6732 W. Coal mine ave., #446 Littleton, Co 80123 888-261-0787 info@naaim.org www.naaim.org

Bimonthly Journal of the National Association of Active Investment Managers Vol. 12 Issue 5, October 2015

Ted Lundgren

President’s Letter

continued on page 2

National Sponsor

The views and opinions of the authors are not necessarily those of NAAIM, its officers or Board of Directors.

Outlook 2015Focused on Catalyst Driven

Growth and Interactive SessionsComing to Dallas/Ft. Worth

November 2-3

Naaim outLooK is a veRy DiffeRent aDvisoR conference. from the first outlook, the focus has been on a conference that reflects the noW of

financial markets. 2015 continues that tradition with two days – november 2-3 – focused on current financial markets, the latest technical research, marketing techniques that work in today’s environment, top issues investment advisors face and the catalysts that are changing investment management.

this is a conference for active investment managers, by active investment managers. Round table discussions focus on topics determined by the naaim membership. Panels take

continued on page 14

2 October 2015

on talking with clients in tough times and the need to think ahead to succession. speakers bring insights into technical analysis, the financial markets, and effective marketing tools. and at the end, because active management is the core of naaim membership, the shark tank preliminaries put the spotlight on how naaim members manage client assets – their strategies, trading approaches and results.

it’s all taking place at the Dallas/fort Worth airport marriott (selected for travel efficiencies from throughout the U.S.) from 8 a.m. monday, november 2, through 5 p.m. tuesday, november 3. to stay overnight onsite, make your hotel reser-vations now to take advantage of a limited group room block at $129 single/double plus fees and taxes. Call +1-972-929-8800 – and mention naaim for the reduced room rate, only good through sunday, october 11.

“between speakers tom mcClellan and Will geisdorf of ned Davis Research group, outlook advisors have access to some of the finest technical market research and fundamental insights into the market,” said Ken graves, president of Capital

Research advisors, inc. and chair of the naaim agenda Committee. “michael stern with envestnet offers great insight into using tamPs to market active management systems. this is keyboard money. it doesn’t require client interaction and the visibility of the platforms can make a huge difference. my firm saw a 600% increase in tamP assets in just 12 days during august. yes, some of it is hot money, but if well managed that money will stay with you.”

“our goal in putting together the agenda for outlook has always had one focus, giving attendees actionable ideas they can take home and use to grow their firms,” he explained. “but you have to be there and an active part of the conversa-tion to benefit.”

a registration form is included on page 15 of this news-letter. online registration is also available at www.naaim.org/outlook/. hotel reservations must be made by october 11th to qualify for the naaim rate. Don’t take a chance on missing out on the insights of outlook 2015.

Discover CATALYSTS that Will Transform Your Business at Outlook 2015

Mark your calendar now for two full days - November 2-3 - of presentations, networking, and round table discussions on

• financial markets, • optimizing your advisory business and

• better tools for investment management.Explore catalysts that will take your firm to the next level. Experience the peer-to-peer collaboration unique to NAAIM. It all happens November 2-3 at the DFW Airport Marriott. To make reservations at the Dallas/Ft. Worth Airport Marriott, contact the hotel directly at +1-972-929-8800 - and mention

NAAIM to receive the $129 single/double group rate.

Outlook 2015 — continued from page 1

www.naaim.org 3

Meet Outlook Presenters

NDRG Looks at Investment Opportunities in 2016

Stocks, bonds, and commodities are in dramatically different stages of their secular lifecycles. What is the relative attractiveness of each? What will returns look like in 2016 and beyond? What are the biggest challenges on the horizon?

backed by the research and data gathering expertise of more than 100 market analysts from venice, florida to boston, atlanta, san francisco, and London, Will geisdorf, Cmt, global strategist for ned Davis Research group, brings answers to those ques-tions to outlook 2015.

Will is a member of nDRg’s global asset allocation team and works with the firm’s Chief global investment strategist, tim hayes, and others to develop the firm’s u.s. and global equities/asset allocation services. he also heads up technical Corner, a premium service dedicated to a shorter-term time horizon. Will joined the firm in 2007 after working as a senior Currency trader for Premierefx, where he hosted a daily radio program, provided market commentary, and traded the firm’s in-house foreign currency account. his bachelor of science degree in finance from the university of Central florida is complemented by his Chartered market technician (Cmt) designation. Will is also a designated subject matter expert by the Cmt board of governors and helps the market techni-cians association enhance the quality and recognition of the Cmt charter.

nDRg has been providing the world’s leading investment management firms with objec-tive, historical research since 1980. With a range of research

products and services from the macro to the micro, the firm prides itself on bringing clients balanced strategic insights and actionable ideas. Join Will geisdorf at outlook 2015 as he shares opportunities for profit in 2016 identified by nDRg.

and for a quick look back…in 2014, nedDavis Research presented actionable ideas at the may naaim uncommon Knowledge conference. targeted as to top sector opportunities was utilities – which went on to outperform all other sectors in 2014.

Explore the Potential of TAMP Platforms to Grow Your Advisory Business

Partnering with turnkey asset management Platforms (tamPs) can reap significant benefits for increasing efficiency and scalability of your portfolio management or advisory busi-ness. take a look behind the scenes to determine the advan-tages and disadvantages of tamP platforms for your fee-based managed account business and gain insight into the types of platforms and differing service level offerings. find out why many advisers believe tamPs offer one of the greatest and most efficient avenues for investment product distribution, why they have recently experienced explosive growth and are now ready to become the dominant model of investment management in the retail wealth management space.

michael stern provides outlook attendees with an in-depth look at tamP platforms in his presenta-tion “Partnering with turnkey asset management Platforms (tamPs) for Wide Distribution and scalability of managed account investment Prod-ucts,” at the 2015 naaim outlook Conference.

michael is vice President of manager solutions and Client Conversions at envestnet asset management. he has more than 23 years of financial industry experience including as a market maker for over 12 years, a proprietary hedge fund trader, and portfolio manager and head trader for a large Ria firm in virginia beach. michael is a past President of the american association of Professional technical analysts (aaPta), and has served on numerous committees and industry boards including the national stock exchange and nasdaq trade Practices Committees, the secu-rity traders association (sta) and the money management institute (mmi) model standard subcommittee.

Tom McClellan - Forecasting The Stock Market A Year (Or More) Ahead Of Time

in early august 2015, tom mcClellan was featured in a Market-Watch.com article detailing how he has been seeing the 2015 market top coming for almost a year ahead of time. Right on schedule, the market began spiraling down. During his presentation, tom will share how he formulated that forecast, plus the other tools he uses to predict the market’s future. continued on page 4

4 October 2015

tom has been the editor of The McClellan Market Report newsletter since 1995, and works with his father sherman mcClellan who created the mcClellan oscillator and summa-tion index. he has been recognized by Timer Digest as a consistently high-ranking market timer, earning the designa-tion ofLongTermTimeroftheYear for both 2011 and 2012. as of Timer Digest’s aug. 24, 2015 issue, tom is their #1 gold timer for the prior 12 months. he is a 1982 graduate of West Point, and served for 11 years as an army officer and helicopter pilot before starting his career in market analysis.

it’s been a couple years since tom spoke to the naaim membership, but his presentations are well remembered for their insightfulness and accuracy. this presentation promises to continue the trend of intriguing insights into the financial markets where history doesn’t repeat, but it has an interesting habit of rhyming.

Meet the Outlook 2015 Sponsors

NAAIM is proud to recognize the following 2015 Outlook Sponsors

2015 NatioNal SpoNSor

2015 platiNum SpoNSorS

New Sponsorship Opportunities Open Up in 2016

SPonsoRs fiRms aRe an essentiaL PaRt of naaim, helping to fund our conferences and programs and bringing their expertise and experience, and prod-

ucts and services to the membership. Just as new members bring new ideas and energy to naaim, new sponsor firms strengthen the organization with their offerings. sponsorship levels range from the $50,000 national sponsorship with its year-around involvement in naaim’s conferences, work-shops and programs to the innovation sponsorship, which participates through a one-day exhibit during the uncommon Knowledge conference.

as naaim begins its 2016 sponsorship drive, members are asked to recommend firms they believe would offer value to the membership and who in turn would benefit from the business of the naaim members. to refer a potential sponsor members can:• Requestasponsorshippacketandprovidetheinfor-

mationdirectlytothefirm• Providethefirmnameandcontactinformationto

NAAIM.

for a sponsorship packet or to have naaim contact the potential sponsor directly, please contact susan baber at info@naaim.org.

Round Table Discussions Bring Peer-to-Peer to the Forefront

Naaim membeRs tenD to KnoW the business of active investment management inside out, with areas of expertise that make them an excellent

resource and source of new ideas. Which is why naaim Round table Discussions are a popular agenda item at outlook Conferences. topics for the Round table discussions are developed by surveying naaim members on the topics where they would like the input of their peers. each round table session offers several discussions taking place simultane-ously, which makes the wrap-up at the end of the day particu-larly useful!

Day 1 of the 2015 outlook conference features two separate round table sessions and concludes with round table summaries during the general session. to avoid missing important discussions, it helps to have multiple members of your firm attending.

Meet Outlook PresenterscONTINuED FrOM pAgE 3

Call 800.258.4332 to ask us about how we and our Rydex products can help you in your business.

Read a fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives,risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.258.4332.Inverse and leveraged funds are not suitable for all investors. •These funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. •The more a fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. •Inverse funds involve certain risks, which include increased volatility due to the funds’ possible use of short sales of securities and derivatives, such as options and futures. •The funds’ use of derivatives, such as futures, options and swap agreements, may expose the funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. •Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. •Leveraged and inverse funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the funds seek to track the performance of their benchmark on a daily basis, mathematical compounding,especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly,quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. • For more on these and other risks,please read the prospectus.

ETFs may not be suitable for all investors. • Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Most investors will also incur customary brokerage commissions when buying or selling shares of an ETF. • Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. • ETF Shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of an ETF’s holdings. In addition, there can be no assurance that an active trading market for shares will develop or be maintained. • Tracking error risk refers to the risk that the advisor may not be able to cause the ETF’s performance to match or correlate to that of the ETF’s Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the ETF’s performance to be less than you expect.

Shares of the funds are not deposits of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. Certain funds may be affected by risks that include those associated with sector concentration, international investing, investing in small and/or medium size companies, and/or the funds’ possible use of investment techniques and strategies such as leverage, derivatives and short sales of securities and alternative or nontraditional asset classes and strategies such as absolute return, long/short, commodities, currencies and managed futures. Please see the funds’ prospectus for more information.

Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”). Securities offered through Guggenheim Funds Distributors, LLC. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim Partners, LLC. #18387

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▪ Breadth & Flexibility: Unlimited exchange privileges, with no holding periods and transaction fees, among equivalent share classes, of the 56 Rydex funds (Certain share classes may impose sales charges on new purchases or for early redemptions). We also offer 12 funds that price twice daily through Guggenheim Investments and on select platforms.

▪ Innovation: A leader in providing benchmark replication products, as well as the industry’s first inverse and leveraged mutual funds.

▪ Thought Leadership: Scott Minerd, our Chief Investment Officer, guides Guggenheim Investments’ investment strategies and our views on global developments. In addition, we publish topical white papers and thought pieces that can be valuable in today’s market.

▪ Responsiveness: A team of dedicated sales professionals who understand and address the needs of active advisors.

6 October 2015

OUTLOOK 2015 Catalysts for Growth

November 2 & 3 DFW Airport Marriott

AGENDAMonday,November27:00am board meeting8:00 Registration9:00 Welcome– ted Lundgren, naaim President9:15-10:15 ForecastingtheStockMarketaYear(ormore)AheadofTime-tom mcClellan, editor, The

McClellan Market Report10:15-11:15 WherewilltheMarketProvideOpportunitiesin2016?William geisdorf, Cmt, strategist,

ned Davis Research11:15-12:15pm HowtotalktoClientsinToughTimes–member Panel12:15-1:30 Lunch – sponsor introductions1:30-2:30 PartneringwithTurnkeyAssetManagementPlatforms(TAMPs)forWideDistributionand

ScalabilityofManagedAccountInvestmentProducts–michael stern, envestnet2:30-3:15 RoundTableSession#1–concurrent session topics: • trading models and indicators • marketing Direct to Clients • outsourcing – tamPs, WRaP programs, hedge funds, etc.3:15-3:45 Refreshment break3:45-4:30 RoundTableSession#2(topics to be announced)4:30-5:30 RoundTableSummaries– attendee participation – general session5:30-6:30 Cocktail Reception

Tuesday,November38:00am Continental breakfast – sponsor area9:00 tba10:00 LeeJohnson,LeeJohnsonCapitalManagement11:00 break11:30 DiscovertheValueofYourFirmfor SuccessionPlanning--erik Pahlow, executive vice President, succession Resources group12:30-1:30pm Lunch1:45-3:00 SharkTankPreliminary3:00-3:30 break3:30-5:00 SharkTankPreliminary5:00 adjourn

The naaim shaRK tanK is an oPPoRtunity for the developers of active investing approaches to pitch their strategies to fellow advisers and active

investment managers in pursuit of sub-adviser agreements. the naaim’s outLooK shark tank Preliminary Competition will be held on tuesday, november 3, 2015 in Dallas at the conclusion of the outlook Conference. 12 applicant firms will

be invited to present their strategies at the preliminary event. six of the presenting firms will be invited to compete in the shark tank finals in may 2016 for first place and a cash prize of $5,000, along with other valuable benefits. the competi-tion is open to Registered investment advisors and investment advisor Representatives, including 40 aCt funds.

http://www.naaim.org/events/naaim-shark-tank/

Shark Tank Preliminaries Will Be Held Nov. 3 at the NAAIM Outlook Conference

8 October 2015

Stockshavefallenabout10%offtheirhighsbuthaven’tyethitthe20%declinemarkerthatdefinesarecession.

Economicdataaremixedbutnoindicatorisclearlyflashingarecessionsignalyet.

Theyieldcurveisoneofthemostreliablereces-sionindicators.WiththeFedratehikedecisionstilllooming,themarketsawaithowthatmightimpactlongandshortterminterestrates.

Wall street has been behaving erratically over the past few weeks ever since the Chinese conta-gion finally reached u.s. shores. as of the close on september 8, 2015, the s&P 500 has shed nearly 110 points, a 5.29% loss, in the past month even after recovering from a drop of nearly 230 points earlier. meanwhile vola-tility has soared more than 85% over the same time frame and is currently holding steady around 25.

historically, such a high volatility level is an indication of strong bearish activity, but whether this is a harbinger of a well-needed correction or the beginning of a recession is still unknown.

the recent rise in uncertainty didn’t completely blind-side markets as many saw the Chinese collapse as all but imminent while the long bull run in domestic markets was well overdue for some kind of corrective activity. but with so many unanswered questions floating around on Wall street about the global economy, the fed, the u.s. economy, corporate earnings and more, investors are left scratching their heads as to whether the storm is temporary or a sign of a much larger problem.

Examining the Ways of the Bearthe standard definition of a bear market is a decline in

stocks of 20% or more. according to research by bamL, there have been 25 bear markets since 1929 where the market fell by 20% or more without a subsequent 20% rally. on average, the bear market lasted 10 months and the broader averages fell around 35% with a frequency of occurring once every 3.4 years.

the last bear market ended in march of 2009 which means this current bull market has gone on for about six years

and 6 months. Just by looking at the length of the bull run, we should feel at least slightly concerned that a real bear market is potentially on our doorstep.

taking a look at the bullish side of things, the same report shows 25 bull markets since 1929 with each one lasting an average of 31 months and posting a gain of 103.5%. since march 9, 2009, the s&P 500 has gained more than 190%. if we take it from the s&P’s highest point, the gain is more than 215%.

as it stands though, we certainly aren’t in a bear market – at least not yet. stocks are down, but they haven’t shed 20%. since the market high, stocks have dropped just shy of 10% which fits the definition of a correction but would still have to fall a considerable amount to change that senti-ment to recession.

if we look at correc-tions, we see that they occur much more frequently. Declines of 10% or more happen about once a year on average and last 115 days. may 20th, 2015 was

the date the s&P 500 hit its high of 2134.72 – 111 days ago as of september 8, 2015.

What all this tells us is that we can be sure that we’re in a correction, but there’s still time for it to fully show its fangs as a bear market and pull us into a recessionary economic phase.

Putting the Pieces Togetherthere are more ways to gather evidence of a reces-

sion other than tracking timelines and averages. there are a number of places we can look to see if there’s more cause for concern when the market undergoes a correction.

Economic Datathe first place to look for signs that a correction might

actually be the head of a recession is to look at what the economy is telling us. the most recent jobs report that came out on friday revealed that unemployment was at 5.1% – nearly full employment for a healthy economy and a 7-year low. however, jobs growth came in slightly under expectations at 173,000 which means while americans might be currently employed, new jobs aren’t coming along as well as we would expect if the economy was truly strong.

after a long bull market, we should see rising inflation as well. however, this has not been the case with inflation

Understanding the Difference Between a Correction and the Start of a RecessionBy FArIBA rONNAsI

www.naaim.org 9

actually turning to deflation several times this year. Despite the slight uptick in the past three months with inflation rising from zero in may to 0.1% in June and 0.2% in July, the figure is well short of the fed’s target rate of 2%. Persistently low inflation is a sign of an economy that’s struggling to grow and not something that generally rises quickly in a short amount of time.

according to the latest markit manufacturing Pmi figures, u.s. factory activity is at a 22-month low right now with the Pmi at just 53.0. this index monitors the performance of the manufacturing sector and is a good indicator of growth in the economy. any reading under 50 is a sign of recession and with the Pmi falling from 53.8 last month, any further drop could be a cause for concern. as it stands, it’s still not signaling a recession, but it’s starting to flirt with the line.

other figures like the gDP are also closely examined. on that front, a recession doesn’t seem as threatening. gDP growth for the second quarter came in much higher than expected at 3.7%, which was higher than the 2.3% previously anticipated. it was a welcome surprise after a disappointing 1st quarter where growth was an anemic 0.6%.

Valuationsstock valuations tell us quite a bit about what investors

are thinking as well. if traders are willing to pay a premium for stocks above historical averages, then it would make sense that the economy is expected to grow at a greater rate.

at 19.83 as of september 8, 2015, equity valuations are significantly higher than their 15.55 historical average while gDP growth isn’t high enough to truly justify the premium. When stocks begin to trade above their fair value, there’s a danger of a bubble forming as unrealistic expectations begin to dominate Wall street instead of actual earnings results.

this type of “irrational exuberance,” a phrase coined by the legendary alan greenspan, is dangerous for stocks and is often one of the main contributors of regular corrective market cycles. however, high valuations don’t always trigger a reversal pattern. stocks can stay at high multiples for years without a major correction back to the mean, so valuations alone aren’t usually enough to trigger a recession unless there’s more bearish activity associated with it.

Yield Curveone of the most tried and true indicators of an economic

recession comes from watching the yield curve. this curve shows the difference between long term interest rates and short term interest rates and it’s usually defined as the 10-year treasury against the fed funds rate.

a normal yield curve will show that long term interest rates are higher than short term interest rates. the longer the time frame, the higher the interest demanded will be considering

inflation and the time value of money. however, an inverted yield curve, where short term interest rates rise above long term rates, indicates that future value will actually be less than current value – a strong indicator of an upcoming recession.

Right now, long term rates exceed short term ones with the yield on the 10-year at 2.13% while the fed funds rate sits at 0.14% as of september 4, 2015. based on that data, a recession seems unlikely. however with the upcoming fed rate hike decision still out there, we will have to wait and see how rates respond to either a hike or inaction. if the spread begins to thin and the yield on the 10-year stays flat or even decreases while the fed funds rate climbs, that could be an indicator that all is not well with the economy.

The Bottom LineRight now, the data is mixed as to whether or not we’re

in a correction or a recession. only time will tell us which of those scenarios are accurate. investors will want to keep an eye on the latest economic data although the fed rate decision will most likely be the biggest indicator of an upcoming recession.

Corporate earnings will continue to play a key role in valuations as well. if corporate earnings stay healthy, then it could justify higher multiples in the market. if it is just a correction, then stocks could have further room to run before a recession actually hits the economy.

the value of the dollar continues to be a critical point here as well. if the dollar stays strong relative to other curren-cies, it will keep negatively impacting earnings from compa-nies that face foreign currency risk.

finally, the business cycle is a good way to keep track of the state of the economy as well. however, the data isn’t conclusive with the top three performing sectors year-to-date being real estate, health care, and technology. it’s a mix of sectors that perform well during a recession and during economic expansions, making it very difficult to pinpoint the exact phase of the business cycle this market is currently in.

Ms. Fariba Ronnasi, president and founder of Elite Wealth Management, Inc. has headed the strategic management of numerous high net-worth individuals. Prior to establishing Elite Wealth Management in October of 2004, Fariba worked as Managing Director for the Private Wealth Division of Columbia Management Company and was responsible for expanding the Private Portfolios Group on the West Coast. She was a Business Development Manager for Citicorp in Private Banking Division and prior to joining Citicorp, worked as the Senior Private Banking Manager at Keycorp and established the Technology group for the Private Bank. She has 23 years of solid experience in the field of finance and investment management. Fariba received both her Bachelor’s and her Master’s degree from Seattle University in the field of Finance with a minor in Economics.

“There are a number of places we can look to see if there’s more cause for concern when the market undergoes a correction.”

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www.naaim.org 11

Performance Transparency Benefits EveryoneBy NOrMAN D. pAppOus

Soon afteR i Was hiReD as a tRainee finanCiaL advisor by a global financial services firm, i attended a “pep rally” type event, where the Ceo addressed about

400 investment professionals. the year before i had returned to the usa from London, where i had worked in management roles for several institutional investment firms. Wanting to stay close to home, i decided to move to the retail side of the busi-ness and cater to the retail investor. Little did i realize just how different the two sides of the same industry were…

We took our seats in the auditorium. then, we waited. five minutes went by, then ten… fifteen… by this time, half the audience were looking at their watches, and the other half were shuffling for their itineraries, as the Ceo suddenly scam-pered onto the stage.

“sorry i’m late,” he said, “but i was just on the phone with our largest producing financial advisor. he’s out in santa fe. he is successful and brings in more assets than anyone in the firm, but he has a problem i am trying to get him to address. When the market goes up, his clients don’t make as much as the market, and when the market goes down, his clients lose more than the market.”

everyone laughed. except for me.he continued, “i can’t get him to use our third-party

investment managers.”everyone laughed again. except for me.my jaw dropped as i sat there in horror. the Ceo of a

major financial institution admitted that he couldn’t dictate a strategy to one of his financial advisors that would benefit their clients. it hit me that the value to the firm was the advisor’s ability to raise aum – not skillfully manage a portfolio of securi-ties. that is a significant difference between the two sides of the same industry. While investment management will always be a relationship business, the core of an institutional investment firm’s ability to attract aum is the demonstrated investing skill of their investment managers. however, in the retail invest-ment world it is hugely problematic to clearly place a value on a financial advisor’s investing skill. Why? i think it is based in the retail investment industry’s performance reporting.

few retail investors receive reporting that analyzes any kind of risk/reward performance that would indicate if their advisor’s investing skill is adding value to the portfolio or if their fees are simply acting as a performance drag. ideally, retail investors should have access to an objective, third-party, risk-adjusted analysis provided in a transparent manner. these are currently the most prevalent gaps in the retail investment industry’s reporting:1. improper benchmarking2. Lack of aggregate risk studies3. Lack of risk-adjusted return studies4. no comparative performance ability – how are other inves-

tors doing that have a similar risk appetite?

5. Lack of an appearance of neutrality – let’s face it, clients believe that a report generated by their advisor’s firm is akin to someone grading their own paper. it does not foster confidence or a feeling of transparency.

in the early 1980s, morningstar saw these gaps in the mutual fund marketplace. back then mutual funds were distributing marketing materials that were not standardized. the proprietary nature of each firm’s performance reports greatly confused investors who were trying to educate them-selves and choose wisely between different funds. addressing this need in the marketplace, morningstar gathered the neces-sary data and standardized the fund industry’s performance reporting for the investing public. mutual funds were forced to own their performance and investors were provided with a level of transparency that they coveted.

over 30 years later, it is plain that the standardization of objective, quantitatively-based, third-party performance reporting, and the resulting transparency, has benefited the fund industry and its clients. imagine the benefit to the retail investment industry if this same approach could be adopted in a cost-effective manner at the financial advisor level. While disclosure laws functionally prevent the exact duplication of morningstar’s model for the entire financial advisor industry, existing clients and skilled advisors would be well served by this approach. such an analysis must serve, and have its only duty to the advisor’s client and not the advisor or their firm – only in this way there could be no question of neutrality.

advisors that are highly skilled and not aligned with a major broker-dealer often find themselves fighting against billion-dollar marketing machines. a neutral, objective, third-party portfolio performance analysis would level that playing field by not only helping skilled advisors, regardless of firm size, retain existing clients and increase aum, but it could also serve as a credible motivator for highly valued client referrals. Lastly, such an analysis could also serve to reverse the current trend against the retail investment industry’s largest nemesis – margin compression. a neutral, objective, third-party portfolio perfor-mance analysis that revealed a client’s portfolio to be managed by a highly skilled advisor is the perfect tool for that advisor to reference and charge what they are worth rather than have their fees be dictated by low-cost, low-value providers.

Norman D. Pappous is Co-Founder and CEO of Grade My Advisor. Norman has been in the investment industry for over 20 years and worked in management roles for ABN Amro UK, a US mutual fund company, Close Bros. Investments UK, and as a financial advisor with UBS and Merrill Lynch. He was named “Leading Edge Advisor” in 2009 by the Structured Products Association.

Advisors Preferred, LLCbhumphrey@advisorspreferred.com888-572-8868

CONTACT US

PREFERREDADVISORS

Investing in any mutual fund involves risk, including loss of principal. Risks speci�c to the QES Dynamic Fund include foreign investment risk, derivatives risk, equity risk, ETF risk, �xed income risk, junk bond risk, limited history of operations risk, management risk, non-diversi�cation risk, small and mid-capi-talization risk, turnover risk, and investment strategy risk.

There is no guarantee the QES Dynamic Fund will meet its objectives.

For more information on the risks of the QES Dynamic Fund, including a description of each risk, please refer to the prospectus. An investor should consider the investment objectives, risks, charges, and expenses of the QES Dynamic Fund before investing. This and other information can be found in the Fund’s prospectus, which can be obtained by calling 888-572-8868. The prospectus should be read carefully prior to investing. There is no guarantee tha the QES Dynamic Fund will achieve its investment objectives. Advisors Preferred, LLC serves as the advisor to the QES Dynamic Fund. Ceros Financial Services Inc. is a distributor to the Fund (Member FINRA/SIPC). Advisors Preferred, LLC is a wholly owned subsidiary of Ceros Financial Services, Inc. Catherine Ayers-Rigsby is CEO of Advisors Preferred, President, CEO and registered representative of Ceros Financial Services, Inc. For Financial Professional Use Only.

INTRODUCING

The QES Dynamic Fund (QXHYX) may be appropriate for

advisors who wish to access high-yield returns in a more

liquid and cost-effective way than more traditional

methods. The Fund seeks investment results, before

fees and expenses, that are similar to those of the U.S.

corporate high-yield bond market. The fund is designed

to be available as “no-transaction-fee” and offered to

advisors with unrestricted liquidity. For more informa-

tion, please see the prospectus.FUND FACTS AT A GLANCETickerQXHYX

CUSIP 00771F848

Portfolio ManagerManagement Team1

Minimum Initial Investment$2,500 (Regular Accounts)$1,000 (Retirement Accounts)

Expense Ratio1.80%

1Other members of the Management Team may be registered representatives of Ceros. For more information on the portfolio management team, please see the prospectus and SAI.

QES DYNAMIC FUND

WWW.QESFUNDS.COM

www.naaim.org 13

NAAIM Signature Programs

Call for NAAIM Wagner Award Papers is Here!

LaunCheD in 2009, the naaim WagneR aWaRD is designed to expand awareness of active investment

management techniques and the results of active strategies through the solicitation and publication of research on active management. $10,000 is presented annually for the best paper submitted to the competition.

the competition is open to all investment practitioners, academic faculty and doctoral candidates who submit an inno-vative topic in the area of active investing. this can be either a documented and justified investing approach or an explora-tion into the validity of active investing. active investing topics can involve making investment decisions using technical anal-ysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc.

the naaim Website has a new feature that allows anyone to search for and download (up to 3 at a time) any of the previously-submitted whitepapers. http://www.naaim.org/resources/find-a-whitepaper/

naaim members can also access the whitepaper collec-tion through the naaim Community by searching under “Resources”.GetyourIntenttoSubmitforminbeforetheendoftheyeartomakesureyougetallthenecessarycommunicationsandreminders.DeadlineforthefinalpaperisFebruary29,2016.http://www.naaim.org/resources/wagner-award-papers/

Explore the NAAIM Indicator Wall (member-only benefit)

The goaL of the inDiCatoR WaLL is to PRoviDe members with a vast array of stock market indicators,

which updated weekly. the ndicator Wall include readings and explanations of indicators and/or models in the areas of price/trend, momentum, key price levels, overbought/sold readings, sentiment, monetary, economic, inflation, and market cycles. the naaim indicator Wall is updated on a weekly basis.

The Indicator Wall is normally password-protected, but is available for a short time with no password so members can review.

http://www.naaim.org/join-naaim/membership-benefits/naaim-indicator-wall/

Keep Up with the NAAIM Exposure Index

The NAAIMExPOSuREINDEx RePResents the average exposure to us equity markets reported by our

members.

the green line shows the close of the s&P 500 total Return index on the survey date. the blue line depicts a two-week moving average of the naaim managers’ responses. it is important to recognize that the naaim exposure index is not predictive in nature and is of little value in attempting to determine what the stock market will do in the future. the primary goal of most active managers is to manage the risk/reward relationship of the stock market and to stay in tune with what the market is doing at any given time. as the name indicates, the naaim exposure index provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks.

http://www.naaim.org/newsresources/naaim-exposure-index/

continued on page 14

14 October 2015

2.NAAIMSharkTank• Present your asset management strategies to your

peers• gain exposure for possible distribution opportunities• Create awareness for your firm and expertise through

naaim communications• Potentially win a cash prize for first place

3.NAAIMSpeakswebsiteblogpostings• Leverage your existing blog by posting your insights

on the naaim website• expand your visibility and gather feedback from your

peers

4.ArticlesintheActiveManager• Write articles that reach more than 5,000 investment

advisers and active management thought leaders• Develop visibility and credibility for your ideas• use reprints of articles in your marketing efforts• Keep up with products, services and investment

insights from naaim members and sponsors

shortly after my last letter in august, equity markets gave us the clues we were looking for and volatility returned. one of the goals of active managers is mitigating risk associated with the wild market swings we are currently experiencing. this, i believe, is an opportunity for active managers like ourselves to prove our worth; in an environment where you can use your acumen to truly make a difference for your clients.

President’s LettercONTINuED FrOM pAgE 1

Philadelphia Workshop Rescheduled to Thursday, Nov. 19

Due to a numbeR of ConfLiCts, the Philadelphia-King of Prussia naaim workshop has been

rescheduled for thursday, november 19. the workshop will be held at the same location as previously advertised, the sheraton valley forge.

the naaim member panel will be represented by Jason Wilder of Cmg, Paul schatz of heritage Capital and Chuck falco with Limerick financial group. Please join us if you can! naaim members attend free.

Workshop details:When: thursday, november 19, 2015 9 a.m.-1:30 p.m. est (includes Lunch)

Where: sheraton valley forge 480 north gulph Road King of Prussia, Pa 19405

NAAIM Signature ProgramscONTINuED FrOM pAgE 13

October 15 is Deadline for 2016 Charles H. Dow Award Research Outlines

TaKe aDvantage of the oPPoRtunity to receive commentary on the topic and approach of your entry for the mta Charles h. Dow award by submit-

ting an outline of your research by october 15.* the Charles h. Dow award highlights outstanding research in technical analysis. the award embodies excellence and creativity in the field of technical analysis. Winning papers have created suc-cessful trading systems, insights into theories of how markets function and have represented the richness and depth of technical analysis.

the competition is open to all practitioners and academics. the submission will be judged based on its ability to enhance the understanding of market action, the concepts of technical analysis, and thorough research. for the 2016 cycle we are accepting previously published non-commercial work. for additional information on the standards of Judg-ment view the guidelines for submissions.

the winning submission is distributed to the vast mta membership spanning 85 countries and approximately 4500 members. the award carries a prize of $5,000 and is presented at the mta gala awards Dinner held in new york City in april. for more information on the Charles h. Dow award, please contact timothy W. hayes, Cmt at Dowaward@mta.org.

FinalSubmissionDeadline:December1,2015

*Submitting an outline is optional. The outline process will help clarify and organize the candidate’s thoughts while providing the foundation for longer research. The candidate will receive commentary on the topic, its suitability, and the approach the candidate is taking.

the upcoming conference will definitely be timely when it comes to learning about managing through volatile envi-ronments. make plans to attend now! members can register online at: naaim.org by using the Login link on the upper right corner of the site. or call susan truesdale at 888-261-0787 for more information about the event.

see you in Dallas.

thanks,

ted Lundgren 2015-2016 naaim President

N A A I M

6732 W. Coal Mine Avenue, Suite 446 | Littleton, CO 80123

T: 888.261.0787 | F: 303.979.2192 | Contact Person: Susan Truesdale

www.naaim.org | info@naaim.org

NAAIM Outlook 2015

November 2 & 3

DFW Airport Marriott

8440 Freeport Parkway Irving, TX 75063-2521

FIRST & LAST NAME (PLEASE PRINT)

1)__________________________________

2)__________________________________

3)__________________________________

Attendee Registration Fee: Circle Choice

NAAIM Member -- $400

Member w/AUM $10,000,000 or less -- $200

Not-Yet Member -- $600

EMAIL ADDRESS:

1)__________________________________

2)__________________________________

3)__________________________________

Method of Payment:

Check Enclosed (payable to NAAIM) MasterCard Visa Amex Discover Card

NAAIM prefers payment by check

COMPANY: ____________________________________

Credit card billing address if different from company address: ______________________________________

______________________________________

ADDRESS: ______________________________

_______________________________________

_______________________________________

___________________________________ CREDIT CARD # EXP. DATE

PHONE NUMBER: _______________________________________

__________________________________ NAME AS IT APPEARS ON CARD

NAAIM has negotiated a group rate of $129 single/double at DFW Airport Marriott. To make reservations online visit: DFW Airport Marriott or call 1-800-228-9290. The deadline to receive the NAAIM group rate is October 9, 2015.

Call for Papers

Paper Topics: The papers should cover an innovative topic in the area of active investing. This can be either a documented and justified investing approach or an exploration into the validity of active investing. Active investing topics can involve making investment decisions using technical analysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc.

Who may submit: The competition is open to all investment practitioners, academic faculty and doctoral candidates in the field.

Selection Criteria: Papers must be of practical significance to practitioners of active investing. The prize will be awarded to a paper resulting from research into active investment management, which NAAIM broadly defines as investment strategies and techniques that improve upon the risk-adjusted return obtainable from a passive, buy-and-hold, investment strategy. Many NAAIM members strive for consistent outperformance and focus on quantitatively or technically oriented investing. However papers that explore other types of active investment management or explore combining one or more types of active investment management will also be considered.

: An ideal paper would provide evidence of the validity of an active investing approach via an example of a trading system that outperforms the market by some well accepted metric such as risk adjusted return, annual return, drawdowns, etc. Examples of supporting evidence sought include backtesting details and parameter sensitivity analysis. Sufficient trading system detail should be provided such that practitioners could replicate the approach. Other criteria used in judging will include the quality of exposition, analytical rigor, and novelty of results. A jury of scholars and investment professionals will review entries and award the prize.

Prizes: Three prizes will be awarded. The best paper will receive the NAAIM Wagner Award valued at $10,000; second place will receive $2,000 and third will receive $1,000. Honorable mentions or additional monetary prizes may be awarded at the judges’ discretion. In addition, the grand prizewinner will be invited to present his / her paper at the NAAIM annual conference: “Uncommon Knowledge 2016,” May 1–4 at the Westin Beach Resort and Spa in Fort Lauderdale, Florida. Free conference attendance, U.S. air travel and lodging will be provided.

Submissions: All submitted papers should be recent, unpublished and of a quality appropriate for publication in a peer-reviewed academic journal. Inquiries and submissions should be electronically submitted to info@naaim.org and the subject line should indicate “2016 Paper Submission.” Papers should be numbered, double-spaced and readable in a PDF format and filed prior to the deadline.

National Association of Active Investment Managers

The National Association of Active Investment Managers (NAAIM) was formed in 1989 as a non-profit association of registered investment advisers who provide active money management services to investors. The goal of the NAAIM members is to produce favorable risk-adjusted returns for their clients using active management strategies as an alternative to passive allocation. NAAIM includes more than 200 member firms nationwide, managing an estimated $31 billion. Associate members include mutual fund companies, ETF providers and a variety of other firms that provide professional services to RIAs.

2016 NAAIM WAgNer AWArd for AdvANces IN ActIve INvestMeNt MANAgeMeNt coMMIttee

FINAL PAPER (up to 30 pages) together with a required 750-1000 word abstract must be submitted electronically to: info@naaim.org by Monday, February 29, 2016 to qualify for the competition. Awards will be announced by Friday, April 1, 2016.

The submission of a paper for review means that the author certifies that the manuscript is not copyrighted, has not been published elsewhere, and consents to NAAIM’s non-exclusive use and publication of the paper.www.naaim.org

FOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARD

FOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARDFOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENT

NAAIM WAGNER AWARDFOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARD

$10,000 To Be Awarded for Best Paper$2,000 and $1,000

for 2nd and 3rd ranked paper

The National Association of Active Investment Managers (NAAIM) sponsors the Wagner Award annually to seek out papers of academic quality that cover an innovative topic in the area of active investing. The following rules govern the submission, judging, ownership and awarding of the papers.

1. All decisions of the NAAIM Wagner Award committee are final. Any occurrence that arises that is not covered in these rules will be adjudicated by the committee.

2. Prizes awarded will be $10,000 for first place, $2,000 for second place and $1,000 for third place. In the event papers of sufficient quality are not submitted to justify the awarding of all three prizes, the NAAIM Wagner Award committee reserves the right to eliminate any or all of the prize levels.

3. Papers will be judged by a panel selected by the NAAIM Wagner Award committee. The prime criteria used in judging the papers are:

1. Practical significance to practitioners of active investing 2. Quality of exposition 3. Analytical rigor 4. Novelty of results

4. Papers should be submitted electronically in PDF format to info@naaim.org and the subject line should indicate “2016 Paper Submission.”

5. Papers should be 30 pages or less and include a separate required 750–1000 word abstract. Papers should be numbered, double-spaced, with a minimum font size of 14, and filed prior to the deadline. Failure to adhere to this will be considered in the judging.

6. By virtue of submission, the author certifies that the manuscript is not copyrighted, has not been previously published elsewhere, consents to NAAIM’s non-exclusive use and publication of the paper and abstract, and agrees to be bound by the rules set forth herein.

7. Delivery of papers to NAAIM is the sole responsibility of the participants. Therefore, it is encouraged that they complete an “Intent to Submit” form that will allow NAAIM to contact them, if needed.

NAAIM will attempt to do so if the situation arises, such as a change to the competition, clarification of the rules, in the event that their paper does not arrive by the deadline at NAAIM headquarters to the specified email address, etc. An email confirmation of receipt of the paper will be sent by NAAIM within three days of submission. It is the author’s responsibility to contact NAAIM at info@naaim.org prior to Monday, February 29, 2016, in the event a confirmation is not received by the author in the 3-day time period.

8. Papers are due at NAAIM on or before midnight on Monday, February 29, 2016.

9. The winners will be notified on or before Friday, April 1, 2016 and announced at the Uncommon Knowledge annual meeting, May 1–4, 2016.

10. The author of the winning paper will be invited to make a presentation at the annual NAAIM conference. This year, it will be held in Fort Lauderdale, Florida, May 1–4, 2016. Expenses of domestic coach airfare and up to 3 nights lodging at the conference hotel, excluding incidental costs, will be provided by NAAIM. Only one author per winning paper will be provided said travel arrangements.

National Association of Active Investment Managers

Competition Rules

FOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARD

www.naaim.org/resources/find-a-whitepaper/

National Association of Active Investment Managers

Please place me on the list to participate in the WAGNER AWARD Competition

The following information will only be used for the purpose of contacting participants with reminders or information about the contest. If more than one author, please include additional author(s)’ names and emails, as well.

PLEASE PRINT OR TYPE

Name

Title

Company, University or Organization

Address

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How did you hear about the NAAIM Wagner Award?

Previous Competitor/Winner

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NAAIM Event

Print this page and fax or mail it to:NAAIM6732 W. Coal Mine Ave., Ste 446Littleton, CO 80123Fax: 303-979-2192

Fill out this page on your computer, with Adobe Reader, and click “Submit” above to send it to info@naaim.org

(You must have Adobe Reader version 7 or later.)

Intent to SubmitPlease submit your intent by December 31, 2015

FOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARDFOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENT

NAAIM WAGNER AWARDFOR ADVANCES IN ACTIVE INVESTMENT MANAGEMENTNAAIM WAGNER AWARD

888-261-0787 or 303-979-1280

Fax: 303-979-2192

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NAAIM New Member Orientation

Academic Faculty

Internet Blog/Bulletin Board

Other:

Use our "Find a Whitepaper" tool to search and download

any of the past NAAIM Wagner Award

submissions.