Liberty Funds Group, Inc : Liberty Wealth Protection Fund

Summary

he Liberty Wealth Protection strategy has been trading pursuant to a commodity pool, Liberty Wealth Protection Fund, since October 1, 2009. As of August, 31, 2011, we are offering the strategy as a separate managed strategy designed to protect the purchasing power of the U.S. Dollar. The Wealth Protection strategy represents the best ideas and cumulative experience of the Liberty team. The strategy, like other managed futures vehicles, does not correlate to the performance of stock and bond markets. At the heart of the strategy are proprietary computerized multi-time scale mathematical models which trade on timeframes from a few hours to a year. These models trade a basket of futures and options markets and generate alpha from multiple, non-correlated sources – trends, short-term mean reversion and expansion, and option time decay.

Under the trend following model, adaptive technical filters identify potential investment opportunities in each market and determine portfolio risk daily. Position weights are adjusted to maintain the portfolio target volatility level. The investment strategy captures the positive returns available from upward trending prices of individual commodity markets. The trend oriented approach will also take short positions in commodities on a filtered basis. The strategy adapts over time to reflect the changing price dynamics of each market.

Short term changes in volatility are monitored for trading opportunities. These opportunities may necessitate long or short positions to be taken in an individual commodity market. The resulting trades have an expected duration of one to five days and exhibit low correlation to both the directional and term structure trades.

Finally, LFG will employ an actively managed strategy that captures returns for a diversified portfolio of commodity and financial futures and options on those futures based on a quantitative investment approach. The program focuses investment activity on 30 or so markets that pass a liquidity screen. The key sectors that the program currently may trade include energy, base metals, precious metals, raw materials, grains, currencies, interest rates, and stock indices. The approach is designed to take advantage of false market momentum associated with failed trend following signals and to capture premium income from the decay of time value in the price of options.