BUSINESS: MacroFocus Portfolios was started in 2009 as an internet-only provider of investment advice for individual investors. The basis of the methodology has been used since April of 2005 for family investments. Edward Verner is the owner.
SERVICES: MacroFocus offers specialized advice and procedures for helping investors manage their own portfolios. Consistent with SEC registration as an Internet Adviser, MacroFocus mainly offers portfolio management advice, not portfolio management. Portfolio management is limited to a few special accounts allowed under the rule, where it takes the form of either more specific advice, or discretionary trading for the client's account. The MacroFocus specialized advice and procedures are further described: APPROACH: The MacroFocus approach starts with a view of market behavior as a non-stationary complex adaptive system that is guided by fundamentals over the long term, but difficult to fathom over the short term. The corollary to the idea that the market is guided by fundamentals over the long term is that price momentum measured over the longer term correlates with fundamental value. This idea is also supported by factor analyses such as Finding Smart Beta in the Factor Zoo by Hsu, and Kalesnik, 2014, suggesting that value, momentum, and low-volatility are the most significant factors in a robust sense. In the evolution of the MacroFocus methodology, such longer- term measures of price momentum, along with volatility, have been found to be useful as a filter for the numerous mutual, exchange-traded, and closed-end funds representing many dimensions of diversity.
MARKET LIMITATIONS: The MacroFocus methodology is dependent on a sufficient diversity of investment options and on longer-term trends. When correlations between all markets prevail, as in a crisis like the Great Recession, the diversity wanes. When volatility increases, the trends are disrupted. Studies of complex adaptive systems, suggest markets function well when there is a diversity of decision rules and agent errors are independent (Revisiting Market Efficiency: The Stock Market as a Complex Adaptive System, Mauboussin, 2002). This is also when the MacroFocus methodology seems to function well. To counter this limitation the MacroFocus methodology has evolved to invoke automated warnings against trading when market volatility and correlations are high. In response to the ultimate disrupters of longer-term trends like the Dot-com Bubble, Great Recession, the MacroFocus Meltdown Indicator was developed in 2013.

In it's original form it did not respond nearly quick enough for the COVID-19 Recession, due to a lag induced by the smoothing technique. After introduction of a smoothing technique with minimal lag, it clearly warned of the COVID-19 Recession, and has been in an intermediate state between normal and abnormal up until 2023-02-27. Since early 2023, MacroFocus methodology invokes an automated shift to Alternate Recommendations specifically tailored to highly correlated bull and bear markets, when there are significant drawdowns in the MacroFocus Meltdown Indicator, or in broad equity market indices. We still consider our methodology as trend-following, but with the addition of bull and bear trends to be used under correlated market conditions.
SUITABILITY: Changing trends will produce turnover from time to time, which is better accommodated in a tax deferred account. A suitable individual is probably someone who would normally choose to do their own investing and sees this service as an aid to that end. A professional with a some market knowledge, a do-it-yourself attitude, and a self-managed 401(k) account would probably be an ideally suitable candidate.
SEC Form ADV Part 2Page 5MacroFocus Portfolios FEATURES AND LIMITATIONS: This is a specialized internet-only service that, by it's nature (trend- following using funds), has the following features and limitations.
The service does not offer investment advice for anything other than mutual, exchange-traded, and closed-end funds.
Mutual, exchange-traded, and closed-end funds offer indirect access to most types of investments, including foreign and domestic, equities and bonds, commodities, precious metals, and bear market investments.
TAILORING: Our model portfolios are primarily filtered on volatility rank. A risk-profile questionnaire is available to help identify a suitable model portfolio. Recommendation candidates will meet the MacroFocus criteria for diversification, volatility rank, performance prediction, and long-term performance, according to the portfolio model. Candidate funds are periodically reviewed for addition to the approved funds list. The review process utilizes a set of qualification metrics that include strict limits on stock and bond allocations and leverage, as well as screening based on fund name and category, all tailored to the portfolio model.
ASSETS UNDER MANAGEMENT: SEC Internet Investment Advisers are precluded by definition from managing assets, apart from a few de minimis accounts. The MacroFocus de minimis account assets totaled $1,109k as of year-end 2022.