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Evolution Of The Spark Model.122309

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  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Book written by Peter Bernstein in 1993 titled “Against the Gods”. In it he goes through a chronological history of the evolution of the understanding of and management of risk. Part of the book talks about the Prudent Man Rule which was established in an 1830 ruling by Justice Samuel Putnam as a result of a lawsuit brought by Harvard and Massachusetts General Hospital against the trustees of an estate in which they were named as a beneficiaries. The ruling was intentionally vague and there is sat for 122 years. Spark Asset Management Group, LLC 01/29/10
  • In 1952, the Journal of Finance published a piece entitled “Portfolio Selection” by a then 25 year old Harry Markowitz. Markowitz’s objective in “Portfolio Selection” was to use the notion of risk to construct portfolios for investors who consider return a desirable thing and variance of return as a negative thing. The strategic role of diversification was Markowitz’s key insight, according to Peter Bernstein in his book “against the gods”. Ultimately led to Markowitz winning the Nobel Prize for Economics in 1990. So what’s the problem? Spark Asset Management Group, LLC 01/29/10
  • The problem is that many of the assumptions used in MPT have been called into questions. Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Winning the Nobel Prize with Markowitz was William Sharpe. Sharpe created what has come to be known as the Capital Asset Pricing Model, which analyzes how financial assets would be valued if all investors followed Markowitz’s recommendations religiously. Ultimately it shows the optimal portfolio for a given level of variance an investors is willing to accept. Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Spark Asset Management Group, LLC 01/29/10
  • Transcript

    • 1.
      • Addressing the Failures of Modern Portfolio Theory
      • Solutions for Investment Advisers
    • 2.
      • Founded in 1999 by advisors with experience from Edward Jones and LPL Financial
      • Dually registered Broker-Dealer (FINRA/SIPC) and SEC registered investment advisor
    • 3. Tim Bain, COO / CFO
      • Licensed since 1994 (started with Edward Jones)
      • Built a retail investment practice from $0 to $25 mil+ in assets in 7 years.
      • Co-Founded Synergy in 1999
      • Currently serves as the firm’s COO / CFO
      • Holds the 7, 24, 27, 53, 55, 63 & 65 licenses as well as a life / health & LTC license
      • Bachelor of Science, Economics and Bachelor of Arts, Business Management – Finance Concentration, North Carolina State University (9 courses short of Industrial Engineering degree)
    • 4. Evolution of the Spark Model Modern Portfolio Theory Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Spark Asset Management Group
      • Division of Northridge Advisors
      • Formed in 2004
      • NC Registered Investment Advisor
      • Henry Harris, Founder & CIO
      Rev 12/21/2009
    • 5. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Hedge Fund experience – Westpark Capital, 2003-2004. SkyLight Capital 2001-2003
      • Research Associate, John McStay Investment Counsel, Dallas, TX, 1998-2000 A highly regarded manager of small cap growth mutual funds and institutional money with more than $8 billion under management
      • Co-Manager, The MBA Investment Fund, LLC, Austin, TX ,1997-1998
      • A $10 million graduate student managed private investment company
      • MBA in Finance, McCombs School of Business, Univ. of Texas @ Austin, 1996-1998
      • Investment Representative, Edward Jones, 1993-1996
      • US Navy Veteran, Officer, Naval Aviator, helicopter pilot, 1984-1992
      • Bachelor of Science, Civil Engineering, Michigan State University, 1984
      • Registered Representative with Synergy Investment Group, LLC
      Rev 12/21/2009
    • 6. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A The Prudent Man Rule Observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested. Harvard College v. Armory 9 Pick (26 Mass) 446, 461 (1830). Rev 12/21/2009
    • 7. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Modern Portfolio Theory Authors awarded Nobel Prize Rev 12/21/2009
    • 8. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Modern Portfolio Theory Authors awarded Nobel Prize BROKEN! Rev 12/21/2009
    • 9. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      Rev 12/21/2009
    • 10. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A The Markowitz Efficient Frontier http://en.wikipedia.org/wiki/Efficient_frontier#The_efficient_frontier Rev 12/21/2009
    • 11. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Calculated by Rydex Investments using information and data presented in Ibbotson Investment Analysis Software. All rights reserved. Used with permission. Standard deviation (risk) is a statistical measure of the historical volatility of an investment that measures the extent to which numbers are spread around their average. Equity returns are based on the S&P 500 index, including the reinvestment of dividends and adjusted for inflation. Bond returns are based on the Ibbotson Long-term Government Bond index with dividends reinvested, adjusted for inflation. Both indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Rev 12/21/2009
    • 12. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      NO! Rev 12/21/2009
    • 13. Evolution of the Spark Model Modern Portfolio Theory Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A This is a Standard Normal Distribution http://en.wikipedia.org/wiki/Normal_distribution Rev 12/21/2009
    • 14. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Does This Look Like A Normal Distribution?!? Frequency Counts (in 1% increments) Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 15. Evolution of the Spark Model Modern Portfolio Theory Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A This is a Standard Normal Distribution http://en.wikipedia.org/wiki/Normal_distribution Rev 12/21/2009
    • 16. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      NO! NO! Rev 12/21/2009
    • 17. Evolution of the Spark Model Modern Portfolio Theory Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Adding non-correlated assets does reduce portfolio variance Rev 12/21/2009
    • 18. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      YES! NO! NO! Rev 12/21/2009
    • 19. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 20. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 21. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      NO! NO! NO! YES! Rev 12/21/2009
    • 22. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 23. Evolution of the Spark Model Modern Portfolio Theory Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Anscombe’s Quartet : Mean X = 9.0, Variance X= 11.0, Mean Y = 7.5, Variance Y= 4.12, Correlation = 0.816, y = 3 + 0.5x http://en.wikipedia.org/wiki/Francis_Anscombe Rev 12/21/2009 What do mean, variance, and correlation really tell us anyways?
    • 24. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A -13.6 -34.1 34.1 13.6 BAD DEVIATION! GOOD DEVIATION! http://en.wikipedia.org/wiki/Normal_distribution Rev 12/21/2009
    • 25. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
        • Sharpe Ratio = (Expected Return – Risk Free)
        • Standard Deviation
        • Sortino Ratio = (Expected Return – Benchmark)
        • Downside Deviation
        • Which one better represents
        • the concerns of investors?
      Rev 12/21/2009
    • 26. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Modern Portfolio Theory
      • The Efficient Frontier leads to the optimal portfolio over time
      • Market returns are normally distributed
      • Adding non-correlated assets improves diversification
      • Correlations between asset classes are constant
      • The proper measure of risk is standard deviation
      • Investors are rational
      NO! NO! NO! NO! YES! Rev 12/21/2009
    • 27.  
    • 28. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Famous (bad) fruit of MPT http://en.wikipedia.org/wiki/Long_Term_Capital_Management Rev 12/21/2009
    • 29. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Our Experience with MPT... Historical data from http://finance.yahoo.com/ For illustrative purposes only. Indexes are unmanaged and do not incur fees, expenses, or transaction charges. Investors cannot invest directly in an index. Strategy implemented 12/31/2008. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance may vary. Neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives.
    • 30. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A ! ! Rev 12/21/2009
    • 31. Evolution of the Spark Model The Math of Recovery Return to Loss Breakeven -20% + 25% -35% + 54% -50% +100% Losses have an asymmetric impact on performance Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 32. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Post-Modern Portfolio Theory
      • Investors are not rational
      • Investors are +2x more sensitive to loss
      • Market returns are not normally distributed
      • Asset class correlations vary over time
      • Diversification is still useful in reducing overall portfolio volatility
      • Reducing expenses compounds over time
      Rev 12/21/2009
    • 33. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Post-Modern Portfolio Theory
      • Brinson, Hood and Beebower studies of 1986 and 1991
        • “ Asset allocation explains 93.6% of quarterly performance variance”
        • But, variance is not performance ...
      Rev 12/21/2009
    • 34. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Post-Modern Portfolio Theory
        • Harvard & Yale Endowments use asset allocation
        • Diversification does reduce portfolio volatility
        • Diversification can reduce rewards as well as risk
      Rev 12/21/2009
    • 35. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Source: Harvard Management Company, Annual Report 2008 Rev 12/21/2009
    • 36. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 37. Evolution of the Spark Model 15,059 trading days S&P 500 7.2% annual return 12.0% annual downside deviation 0.602 Sortino Ratio Data through Nov 5, 2009 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Buy & Hold Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 38. Evolution of the Spark Model 15,059 trading days S&P 500 7.2% annual return 12.0% annual downside deviation 0.602 Sortino Ratio Missed the 10 Best 5.9% annual return 12.0% annual downside deviation 0.494 Sortino Ratio Data through Nov 5, 2009 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Buy & Hold Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 39. Evolution of the Spark Model 15,059 trading days S&P 500 7.2% annual return 12.0% annual downside deviation 0.602 Sortino Ratio Missed the 10 Best 5.9% annual return 12.0% annual downside deviation 0.494 Sortino Ratio Missed the 10 Worst 8.92% annual return 10.6% annual downside deviation 0.844 Sortino Ratio Data through Nov 5, 2009 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Buy & Hold Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 40. Evolution of the Spark Model Data through Nov 5, 2009 15,059 trading days S&P 500 7.2% annual return 12.0% annual downside deviation 0.602 Sortino Ratio Missed Both Best & Worst 7.7% annual return 10.5% annual downside deviation 0.734 Sortino Ratio Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Buy & Hold Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 41. Evolution of the Spark Model Data through Nov 5, 2009 What If You Miss Both the X Best & Worst Days Buy & Hold 10 days 50 days 500 days Annualized Return 7.2% 7.7% 8.0% 8.0% Annualized Downside Deviation 12.0% 10.5% 9.4% 6.5% Sortino Ratio (Return/Risk) 0.602 0.734 0.859 1.232 For the S&P 500 From 1/3/1950 to 11/5/2009 No fees, transaction costs, or expenses. Data from Yahoo!Finance Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 42. Evolution of the Spark Model October 1987 Data through Nov 5, 2009 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 43. Evolution of the Spark Model Fall 2008 Six of the best days ever & Five of the worst days ever Data through Nov 5, 2009 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 44. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Let’s look at this period... Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 45. Evolution of the Spark Model 17 years... Buy&Hold Annual Return 0.45% Downside Deviation 8.6% Sortino Ratio 0.053 Avg Trades/Year N/A Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 46. Evolution of the Spark Model 17 years... Buy&Hold >200 MA Annual Return 0.45% 3.26% Downside Deviation 8.6% 7.7% Sortino Ratio 0.053 0.422 Avg Trades/Year N/A 6.1 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 47. Evolution of the Spark Model 17 years... Buy&Hold >200 MA >50 MA Annual Return 0.45% 3.26% 4.52% Downside Deviation 8.6% 7.7% 7.9% Sortino Ratio 0.053 0.422 0.572 Avg Trades/Year N/A 6.1 15.1 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 48. Evolution of the Spark Model 17 years... Buy&Hold >200 MA >50 MA 50x200 MA Annual Return 0.45% 3.26% 4.52% 1.34% Downside Deviation 8.6% 7.7% 7.9% 8.4% Sortino Ratio 0.053 0.422 0.572 0.160 Avg Trades/Year N/A 6.1 15.1 1.5 Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 49. Evolution of the Spark Model From 12/31/1965 to 12/31/1982 above 200 Day MA 51.5% of time Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 50. Evolution of the Spark Model From 12/31/1982 to 12/31/1999 above 200 Day MA 83.9% of time Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ Historical data from http://finance.yahoo.com/ Rev 12/21/2009
    • 51. Evolution of the Spark Model
        • Market Timing: Fool’s Errand or Prudent Strategy? Aug 1, 2009 12:00 PM, By John Churchill
        • Tactical asset allocation—sometimes referred to by the more maligned term, market timing—can lower portfolio volatility, limit dramatic losses and improve gains in otherwise fickle bear markets, all things that can help advisors keep clients in uncertain times like these.
        • Registered Rep Magazine Article
      Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 52. Evolution of the Spark Model
        • A Quantitative Approach to Tactical Asset Allocation
        • Mebane T. Faber Cambria Investment Management
        • Journal of Wealth Management, Spring 2007
        • Abstract:  The purpose of this paper is to present a simple quantitative method that improves the risk-adjusted returns across various asset classes. A simple moving average timing model is tested since 1900 on the United States equity market before testing since 1973 on other diverse and publicly traded asset class indices, including the Morgan Stanley Capital International EAFE Index (MSCI EAFE), Goldman Sachs Commodity Index (GSCI), National Association of Real Estate Investment Trusts Index (NAREIT), and United States government 10-year Treasury bonds. The approach is then examined in a tactical asset allocation framework where the empirical results are equity-like returns with bond-like volatility and drawdown.
        • Keywords: Asset Allocation, Tactical Asset Allocation, GTAA, Quantitative, Hedge
        • JEL Classifications: C00, C10, C50, G00, G11
      Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 53. Evolution of the Spark Model
        • “ These funds [those with a focus on absolute returns] place strong emphasis on the disciplined use of investment and risk control processes, and... tend to have a low correlation with traditional asset classes.”
        • - Goldman Sachs Pension & Endowment Forum July 1998
      Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 54. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Typical Asset Allocation Components Equities Alternatives Fixed Income Large Cap Equities Real Estate High Yield Bonds Mid Cap Equities Commodities Investment Grade Bonds Small Cap Equities Gold Foreign Bonds Emerging Markets International Equities Rev 12/21/2009 Run Algorithm on Components of the Model Determine Trends of Non-Fixed Income Asset Classes Adjust portfolio as Appropriate
    • 55. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 56. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A A willingness to sit on the sidelines... Rev 12/21/2009
    • 57. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A One of our internal, proprietary tools used to monitor the indicies Rev 12/21/2009
    • 58. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A S&P 500 Index Out: Feb 2008 In: May 2009 Rev 12/21/2009
    • 59. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A For illustrative purposes only. Indexes are unmanaged and do not incur fees, expenses, or transaction charges. Investors cannot invest directly in an index. Strategy implemented 12/31/2008. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance may vary. Neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives.
    • 60. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ For illustrative purposes only. Indexes are unmanaged and do not incur fees, expenses, or transaction charges. Investors cannot invest directly in an index. Strategy implemented 12/31/2008. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance may vary. Neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives.
    • 61. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ For illustrative purposes only. Indexes are unmanaged and do not incur fees, expenses, or transaction charges. Investors cannot invest directly in an index. Strategy implemented 12/31/2008. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance may vary. Neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives.
    • 62. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Historical data from http://finance.yahoo.com/ For illustrative purposes only. Indexes are unmanaged and do not incur fees, expenses, or transaction charges. Investors cannot invest directly in an index. Strategy implemented 12/31/2008. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance may vary. Neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives.
    • 63. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A The Spark Core Examples of possible satellite portfolio components Spark Trends as the Indexed Core With Multiple Asset Classes Company Stock Private Equity Hedge Funds Fixed Income Ladders Other Alternatives Life Insurance Public Non-Traded REITS Rev 12/21/2009
    • 64. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 65. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • For The Client
        • Broad Diversification
        • Core Investment Across Multiple Asset Classes
        • Low Total Expenses
        • Historically Smaller Downside Deviations
        • Focus on Loss Avoidance
        • Tax Awareness in Rebalancing
      Rev 12/21/2009
    • 66. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • For The Advisor – We Anticipate the Following Benefits (But of Course Cannot Guarantee):
        • An Effective Core Portfolio Asset for Client
        • Less Time Spent Managing Assets
        • More Time Relating with Clients
        • Associated Greater Client Retention
        • More Assets Under Management
        • Greater Profitability
        • Less Stress
      Rev 12/21/2009
    • 67. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A You own the relationship with the client We work with you , not the client Rev 12/21/2009
    • 68. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Terms Spark Trends ETF @ Penson $125,000 Spark Pro models @ ProFunds $ 25,000 Set up fee - $100 Early Termination fee – 1 year/$250.00 Rev 12/21/2009
    • 69. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A FAQs Whipsaw? – yes, potentially. Tax Consequences? – yes. Potential short term capital gains/losses. Use in VAs? – yes. Currently set up with Security Benefit. Some legacy accts with Prudential – contingent on having an existing external third party manager. In discussion with Jackson National. Rev 12/21/2009
    • 70. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A
      • Disclaimer regarding forward looking statements
      • Certain statements in this presentation constitute forward-looking statements or statements which may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "forecast", "anticipate", "estimate", "project", "intend", "expect", "should", "believe", and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve, and are subject to known and unknown risks, uncertainties and other factors which could cause Spark’s actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. The risks, uncertainties and other factors are more fully discussed in Spark’s Form ADV. All forward-looking statements attributable to Spark herein are expressly qualified in their entirety by the abovementioned cautionary statement. Spark disclaims any obligation to update forward-looking statements contained in this presentation, except as may be required by law.
      • Disclaimers regarding the Models, Data, and Hypothetical Portfolio Performance and Construction
      • The Spark ETF Trends Model (“Spark Trends Model”, ”Trends Model”, “the Model”) calculations make the following assumptions:
        • Combined Maximum Annual fees of 2.25%, assessed on a monthly basis.
        • Transaction charges of $25 each time a position was bought, sold, or added to. The Model anticipates approximately 20 transactions per year, but there could be more or fewer transactions in any given year. Lower transaction charges would result in higher performance, higher charges would result in lower performance.
        • An initial portfolio value of $500,000. A smaller initial portfolio would increase the drag on performance by transaction charges.
      • The data for these analyses was compiled from publicly available sources. Comparisons are based on hypothetical performance and do not represent actual trading using client assets, but rather reflect the retroactive application of Spark’s investment guidelines and principles to the relevant period. One of the limitations of these hypothetical results is that they were prepared with the benefit of hindsight. Hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. Back-tested performance results may not reflect the impact that material market or economic factors might have had on the use of our guidelines and principles, if they had been used during these periods to actually manage client assets. Your investment experience may differ. We are confident, but have no guarantee, that the hypothetical performance accurately approximates hypothetical historical performance. Actual client accounts will vary, and there is no assurance that client results will be similar to hypothetical results. There is no assurance that any Spark strategy will produce profitable returns or that any account will have results similar to the hypothetical results shown above. You may lose money. Past performance is no guarantee of future results. The investments that resulted in the performance shown above may or may not included securities which we may use in the future. Unless otherwise noted, all results include the reinvestment of dividends, capital gains, and other earnings, but do not consider tax effects.
      • Index & Data Series Disclaimers: The various asset class data was constructed from publicly available sources. For example, the S&P 500 index was constructed from the S&P 500 index as downloaded from the Yahoo!Finance historical price service. Other asset classes were reconstructed from both an Exchange Traded Fund (“ETF”) index where data was available, and/or from a mutual fund with a sufficiently long history to approximate the asset class where the actual ETF data was missing. For example, to approximate the Gold index, data from the SPDR Gold Shares (GLD) which only goes back to 11/18/2004, was combined with data from the Philadelphia Gold & Silver index which goes back to 1983. The mean, media, standard deviation, skew, and kurtosis of the two series was compared for the period where both existed, and a mathematical transformation was applied to the older series to construct a hypothetical data series prior to the existence of the GLD that might have approximated the GLD if that series had existed during the period from 6/20/1996 to the actual inception of the series. Consequently the actual asset class may have a substantially similar or substantially different series of returns and characteristics than those presented here. Our attempts to reconstruct asset class data is made in good faith on a best efforts basis, and we do not warranty or guarantee their accuracy.
      • (Continued on next page)
      Rev 12/21/2009
    • 71. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Investment Risks The strategy may experience periods of increased transaction volumes when asset classes repeatedly change directions. Investing in alternative asset classes or strategies can present unique risks not normally associated with traditional asset classes. Individual positions may possess a high degree of volatility, but when combined in a broader portfolio context the complementary characteristics of alternative investments may potentially work to reduce overall portfolio volatility while enhancing total return over the long term. However, neither diversification, asset allocation, nor a tactical approach can ensure a profit or protect against a loss. There can be no assurance that the Spark ETF Trends model will achieve its investment objectives. The actual holdings and performance of client accounts may differ, and there is no assurance that client results will be similar to hypothetical results. There is no assurance that any Spark strategy will produce profitable returns or that any account will have results similar to the hypothetical results shown above. You may lose money. Past performance is no guarantee of future results. Back-tested data assumes initial $500,000 portfolio, $25 per ticket, 2.00% annual management fees assessed monthly, and does not represent actual model performance. Returns calculated net of all fees and expenses. Performance will vary. The Spark Trends model is an investment management program for separately managed advisory accounts, not a security. (Continued on next page) Rev 12/21/2009
    • 72. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Index & Data Series Disclaimers (continued): The Balanced Benchmark is a synthetic benchmark constructed from the daily change of a blend of 40% S&P 500 Index, 35% Long Government Bonds, and 25% MSCI EAFE Index, rebalanced on a daily basis. No such actual index exists nor can an investor invest directly in any index. The Long Government Bond component of the Balanced Benchmark is represented by the return series for the Dreyfus U.S. Treasury Long-Term Fund (Ticker: DRGBX). • For the period 4/15/2003 to present Emerging Markets is represented by the iShares MSCI Emerging Markets Index (EEM), which seeks investment results that correspond generally to the price and yield performance of the MSCI Emerging Markets index. The index was developed by MSCI as an equity benchmark for international stock performance. It is non-diversified. Prior to 4/15/2003 Emerging Markets is represented by the Delaware Emerging Markets Fund, class A shares (DEMAX). The fund is a diversified open end mutual fund which normally invests at least 80% of assets in investments of emerging market issuers and at least 65% of assets in equity securities of issuers from countries whose economies are considered to be emerging or developing. It may invest up to 35% of assets in fixed-income securities issued by companies in emerging countries or by foreign governments, their agents, instrumentalities or political sub-divisions. The fund may invest more than 25% of assets in the securities of issuers located in the same country. We adjusted the variability of daily returns to more closely match that of the successor index using a variety of mathematical and statistical techniques. • For the period 12/31/98 to present Precious Metals is represented by the PHLX Gold/Silver Sector index (XAU). The PHLX Gold/Silver Sector Index is market capitalization-weighted index designed to track the performance of a set of companies engaged in gold or silver mining sector. • For the period 4/11/2007 to present High Yield is represented by the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). The index is a rules-based index consisting of the most liquid and tradable U.S. dollar-denominated, high-yield corporate bonds for sale in the U.S. Prior to 4/11/2007 High Yield is represented by the Morgan Stanley High Yield Fund Inc. (MSY). The fund was incorporated on September 23, 1993 and is registered as a diversified, closed-end management investment company. The Fund's primary objective is to seek a high level of current income and as a secondary objective, to seek capital appreciation. The Fund seeks to achieve these objectives through investments primarily in high yield securities. We adjusted the variability of daily returns to more closely match that of the successor index using a variety of mathematical and statistical techniques. • For the period 12/31/98 to present Mid Cap Stocks is represented by the S&P Midcap 400 Index, an unmanaged capitalization weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. • For the period 8/27/01 to present Foreign Stocks is represented by the iShares MSCI EAFE Index (EFA). The iShares MSCI EAFE Index Portfolio consists of securities from 21 developed markets. Countries and securities within those countries are held in their capitalization weights. Prior to 8/27/01 Foreign Stocks is represented by the American Funds EuroPacific Growth Fund, Class A (AEPGX). The EuroPacific Growth Fund is a diversified open end mutual fund which primarily invests in securities of issuers located in Europe and the Pacific Basin. We adjusted the variability of daily returns to more closely match that of the successor index using a variety of mathematical and statistical techniques. • For the period from 12/31/1998 to present Large Cap Stocks is represented by the S&P 500 Index. The index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. • For the period 12/31/98 to present Small Cap Stocks is represented by the Russell 2000 Index. The Russell 2000 Index is an unmanaged index consisting of approximately 2000 small capitalization common stocks. • For the period 12/31/1998 to present Energy is represented by the Energy Select Sector SPDR (XLE). The Select Sector SPDR includes companies from the following industries: oil, gas, energy equipment & services. • For the period 12/31/98 to present Cash is represented by the 13-week Treasury Bill (IRX). The rate is based on the discount rate of the most recently auctioned 13-week U.S. Treasury Bill as tracked over time by the Chicago Board Options Exchange. • (Continued on next page) Rev 12/21/2009
    • 73. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Index & Data Series Disclaimers (continued): • For the period 9/29/03 to present Corporate Bonds is represented by the iShares Barclays Aggregate Bond (AGG), which seeks investment results that correspond to the price and yield performance, before fees and expenses, of the total United States investment-grade bond market as defined by the Barclays Capital U.S. Aggregate index. The Underlying index measures the performance of the total United States investment-grade bond market. Prior to 9/29/03 Corporate Bonds is represented by the Van Kampen Corporate Bond A (ACCBX). The fund is a diversified, open end mutual fund that normally invests 60% to 100% of total assets in investment-grade securities. It may invest up to 40% of total assets in securities rated Ba by Moody's or BB by S&P at the time of purchase and no more than 20% of total assets in securities rated B or lower by Moody's or S&P, or unrated securities rated but of comparable quality. We adjusted the variability of daily returns to more closely match that of the successor index using a variety of mathematical and statistical techniques. • For the period from 2/2/2001 to present, Real Estate is represented by the iShares Cohen & Steers Realty Majors Index Fund (ICF). The Cohen & Steers Realty Majors Index is a modified capitalization weighted index of large, liquid, U.S. real estate investment trusts. Prior to 2/2/2001 Real Estate is represented by the Cohen & Steers Total Return Realty Fund Inc. (RFI). The fund operates as a closed-end, non-diversified management investment company. It invests in preferred stock and other fixed income securities. Its portfolio includes investments in health care, residential, shopping center, office and industrial, and hotels. We adjusted the variability of daily returns to more closely match that of the successor index using a variety of mathematical and statistical techniques. • Performance data quoted represents past performance. Past performance is no guarantee of future results. Data was obtained from publicly available sources and is generally believed to be but cannot be guaranteed to be correct. Investors cannot invest directly in an index. The actual vehicles chosen to represent an asset class may not match exactly the performance of the underlying index. The performance figures presented are intended to convey a sense of the magnitude and variability of returns for each asset class as described above and are in no way predictive of future returns for any asset class. In adjusting the variability of daily returns to more closely match that of the successor index through a variety of mathematical and statistical techniques our objective was to increase the similarity of return distributions between the index and its proxy. Additional information regarding this policy is available upon request. • This is not a solicitation to invest in any fund referenced above. Any such solicitation must be made by prospectus only. No statement in this report is to be construed as a recommendation to purchase or sell a security or to provide investment advice. The information within this report has been compiled by Spark for general information and educational purposes only and therefore should not be considered complete, precise, or current. Although every attempt has been made to ensure the accuracy of the information within this report, Spark makes no representation about the completeness, correctness or accuracy of these figures, and assumes no responsibility for any errors or omissions.• "S&P 500™ Index", "S&P 400 MidCap™ Index", are registered trademarks of Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "Select Sector SPDR" is a trademark of the McGraw-Hill Companies, Inc. MSCI, MSCI Inc., MSCI Index and EAFE are service marks of MSCI. PHLX Gold/Silver Sector is a service mark of the Philadelphia Stock Exchange. iBoxx is a registered trademark of International Index Company Limited. iShares is a registered trademark of Barclay's Global Investors, N.A. The Russell 2000® Index is a trademark of the Frank Russell Company. Cohen & Steers®, Cohen & Steers Realty Majors®, and Realty Majors®, are trademarks of Cohen & Steers Capital Management, Inc. There is no affiliation between any of these entities and Spark Asset Management Group. (Continued on next page) Rev 12/21/2009
    • 74. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Certain statements in this presentation constitute forward-looking statements or statements which may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "forecast", "anticipate", "estimate", "project", "intend", "expect", "should", "believe", and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve, and are subject to known and unknown risks, uncertainties and other factors which could cause Spark’s actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. The risks, uncertainties and other factors are more fully discussed in Spark’s Form ADV. All forward-looking statements attributable to Spark herein are expressly qualified in their entirety by the abovementioned cautionary statement. Spark disclaims any obligation to update forward-looking statements contained in this presentation, except as may be required by law. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond Spark’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, Spark’s forward-looking statements. You should not place undue reliance on any forward-looking statement. Rev 12/21/2009
    • 75. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 76. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 77. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Rev 12/21/2009
    • 78. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A sigrep Rev 12/21/2009
    • 79. Evolution of the Spark Model Modern Portfolio Theory Behavioral Finance Post Modern Portfolio Theory Strategic Asset Allocation Market Timing Tactical Asset Allocation Spark Trends Q & A Contact Information: Tim Bain COO / CFO 704-295-6699 [email_address] Thank You Rev 12/21/2009