Index Construction

Since 1980, Carroll Financial has built our business by focusing on one thing: the best interest of the client. Founder and CEO Larry Carroll created and instilled the idea that, “The best interest of the client is the only interest that matters.”  As an independent firm, we have always taken pride in our investment management philosophy.  We strive for customization, consistency, and simplicity.  Over the years, we have delved into a multitude of products and strategies, striving to find what is best for our clients.  Through those products, we’ve experienced capital gains distributions from mutual funds, large tracking-error from active management, and zero-alpha from purely passive vehicles.  Despite those hurdles, and regardless of vehicle, our risk management philosophy and mean-reversion strategy of targeting longer trends in the market prevailed. 

With the advent of factor-based ETFs, we recognized we could better capture our factor strategy by combining minimum volatility, value, and momentum.  We have utilized three separate factors to replicate this strategy for many years and finally realized our large asset base created an advantage.  We could turn what were once three separate positions into one by looking to utilizing the ETF vehicle, thereby virtually eliminating capital gain issues when we needed to sell one factor for another.  The Adaptive Wealth Strategies US Factor Index was born.

Our goal from the beginning has been to design a low-cost, tax-efficient, and alpha-generating strategy for our clients.  The simplistic and common sense origins of our model has not only worked, but is easy to understand and discuss with clients.  The performance and risk metrics speak for themselves.  We did not over-engineer or design this to have the most impressive back test.  We built this index with a rules-based approach that replicates what we have done in client portfolios for years.  This is not something a Ph.D. created on a research desk; it was designed by advisors and portfolio managers to use inside real client accounts.  The strategy was designed to be understood by both the advisor and the client.  The development goal was for the best interest of our existing clients.