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Gravity Investments Completes Successful Stress Test of True Diversification(TM) Optimization System
Research on S&P 500 Confirms Diversification Weighted Index Consistently Outperforms
| Source: Gravity Investments
DENVER, CO--(Marketwire - June 10, 2009) - Gravity Investments (Gravity), a premier
financial engineering firm responsible for the Gsphere visual asset
allocation platform, has announced the results of a series of tests
designed to measure the impact of diversification on investment returns.
The tests, conducted using the Standard & Poor's 500 Index, showed that
using Gravity's True Diversification™ to optimally diversify holdings
consistently outperformed the underlying index in either its capitalization-
or equally-weighted forms. In aggregate, True Diversification™
outperformed the alternatives by 327 basis points.
"It's easy enough for a rational investor to infer that a more diversified
portfolio is preferable to a less diversified portfolio," said James
Damschroder, Founder of Gravity Investments and inventor of the Gsphere
process. "Now we know that diversification, at least the way we conceive
it, is actually a primary enabler of achieving higher returns."
The performance tests, made using the firm's patented Gsphere
Diversification Platform, produced one-, two-, three-, five-, and ten-year
returns, each ending December 31, 2008. In head-to-head tests,
diversification optimization outperformed the index in 40 out of 40
performance calculations. When extended into comparisons to an equally
weighted S&P index, True Diversification™ produced positive gains in 39
of 40 comparison tests.
In the average of all the tests, True Diversification™ outperformed the
market capitalization weighting method by an average of 462 basis points of
annual performance. Outperformance versus the equally weighted index was
192 basis points. Across the 40 tests, True Diversification's greatest
performance gain was 797 basis points and the lowest was a deficit of 37
basis points (the single losing test).
"While the primary objective of diversification optimization is really to
protect against the downside, this research shows that True
Diversification™ still adds to the upside," says Damschroder. "It's hard
to argue the logic of the approach."
Gsphere, Gravity's three-dimensional diversification platform, is an
optimization and analytic suite that bridges advanced optimization with
sales and marketing accents. Central to the methodology is the notion of
what Gravity calls "holistic portfolio visualization." The firm's
innovative approach will benefit virtually every sponsor of investment
product, including broker/dealers, RIAs, insurance companies, mutual fund
companies, hedge funds, pension plans, bank trust groups, 401(k) providers,
fund consultants, family offices, foundations, and endowments.
About Gravity Investments
Gravity Investments, the worldwide leader in Diversification Intelligence,
is a leader in financial engineering and investment technology. A
Denver-based firm, Gravity's Gsphere Portfolio Analysis Platform bridges
the gap between traditional asset allocation and diversification
optimization, providing clients an unparalleled ability to manage and
market investments. For more information on Gravity Investments please
visit www.gravityinvestments.com or call 866-373-8489.