SciVest LOW-VOL Dividend Income Strategy

Investment Objective

The primary objective of the SciVest Low-Vol Dividend Income Portfolio is to provide dividend income that is materially higher than the market Indexes with moderate capital appreciation and materially lower volatility risk than the market Indexes. The Portfolio is also expected to provide diversification relative to capitalization weighting indexes including the market Indexes.

Investment Risk

If held on its own, the SciVest Low-Vol Dividend Income Portfolio is considered medium-low risk, with expected long-term volatility risk materially lower than the market Indexes. When the SciVest Low-Vol Dividend Income Portfolio is combined with other equity and fixed income portfolios, it is also expected to lower overall portfolio risk through diversification.

Investment Concept

Low return volatility underlies the “Low-Risk Effect” – the empirical finding that higher risk measured by either return volatility risk or market beta risk is not rewarded with a higher return within in global stock markets, as would generally be expected. The Low-Risk Effect has been widely studied within the academic and quantitative investment practitioner communities. SciVest has found that combining lower risk, higher dividend yield stocks that have relatively strong stock price momentum produces a portfolio with attractive long-term risk and return characteristics, with good downside protection and a high dividend income stream.

Investment Strategy

The SciVest Low-Vol Dividend Income Strategy is a systematic, rules-based, equity strategy that invests in dividend-paying stocks, which meet a number of liquidity and risk management constraints, that are selected using the SciVest Low-Vol Dividend Factor. The Factor ranks stocks with the best combinations of the highest dividend yields which have the lowest volatility risk and the best price momentum. That is, the SciVest Low-Vol Dividend Factor identifies those low-risk stocks with the highest dividend yields, where the dividend yield has been ‘confirmed’ by stock price movements. The Factor is an equal weighted composite of 3 concepts: (i) stock price volatility (lower better); (ii) indicated dividend yield (higher better); and (iii) stock price momentum (higher better). The SciVest Low-Vol Dividend Income Portfolio is rebalanced and reconstituted quarterly moving towards the then current highest ranked SciVest Low-Vol Dividend Factor stocks, on an equal-weighted basis, while still abiding by turn-over, liquidity, income yield and risk management constraints. These constraints include a targeted Portfolio dividend yield to be at least 1.5% p.a. higher than the market Index and strict maximum and minimum relative exposures to sectors, sub-sectors and industries as compared to the market Index, so that Portfolio has a similar make-up across various segments of the economy as the market Index.