Managers & Models

Main Management Active Sector Rotation

Strategy Overview: How Active Sector Rotation Model Works

The Main Management Active Sector Rotation Model, created in 2002, is managed in a tax-aware manner from the top down, primarily using passive sector and industry-based ETFs, paired with a bottom-up approach focusing on fundamentals, valuations, and industry trends.

The Fundamentals

The first step of the investment process is to identify sector, industry and sub-industry ETFs that appear undervalued relative to history and the rest of the market based on valuation and growth metrics.

The Catalyst

The second step is to identify an appropriate catalyst or macroeconomic trend that may help close that valuation discount and lead to price appreciation.

This two-step approach results in sector exposure that is overweight or underweight relative to the benchmark; overweight in favorable sectors and underweight in unfavorable sectors. Additionally, the process results in buy/sell price targets for the sector, along with a timeframe that the investment committee can actively monitor and discuss.

Where It Fits

• A core, diversified equity holding within a portfolio
• Maintains market exposure with tilts towards favorable sectors and industries

As noted in the chart below, the model is currently overweighted in three primary sectors:

• Energy - Attractive valuations relative to the S&P 500 and stands to benefit from continued oil demand, even as the globe starts to transition to cleaner energy sources.
• Healthcare - A strong barbell of defensive healthcare companies combined with growth biotech exposure, which is trading at historically low valuations relative to the market (per Factset).
• Communication Services - Discounted valuations relative to history and offers a mix of growth at a reasonable price led by the large-cap tech companies and relative value found in the more defensive telecom providers.

As of 3/31/2023
Source: Morningstar Direct, Main Management

Main Management, LLC is an SEC registered investment adviser that provides innovative and unique investment solutions for financial advisors, high-net worth clients, endowments, and family offices. Founded by three industry veterans with over 100 years of combined experience, Main Management focuses on the complete client experience by paying significant attention to the post-fee and post-tax results across various market conditions. With a team-based approach, a client-centric culture and an external advisory board of senior investment leaders, Main Management strives to offer exceptional service and value to its clients.