Vertex CapitalEngine I: factor rotation
Beta that adapts
Rotates between global investment styles, favouring the styles that are currently working.
Investment strategy
How Vertex Fund invests.
Most portfolio outcomes are explained by exposures to factors and themes, not by individual stock picks. Vertex Fund makes those exposures explicit, measures them separately and rotates towards what is working. When a regime breaks, each engine steps aside.
Philosophy
Two engines, two layers of risk control.
Engine II: thematic alpha
Returns beyond factors
Invests only in themes whose returns go beyond what the market and investment styles explain.
Allocator
Capital balanced by risk
Balances risk between the two engines and tilts toward the stronger one within 30 to 70% bounds.
Drawdown switch
A defined response to stress
Each engine moves to gold and EUR government bonds after a 20% fall and re-enters once part of the loss is recovered.
Comparison
Unlike traditional active equity.
Traditional bottom-up portfolios carry factor and thematic exposures implicitly, and they tend to surface only in market stress. Vertex Fund makes them explicit.
| Traditional active equity | Vertex Fund | |
|---|---|---|
| Source of return | Stock picking; factor bets are implicit and often unintended | Explicit: factor beta and thematic alpha, measured separately |
| Decision process | Discretionary, forecast-driven | Model-driven, signals refreshed monthly; deviations only in exceptional cases |
| Response to stress | Typically stays fully invested | Defined switch to gold and EUR government bonds, aiming to reduce losses |
| Transparency | Opaque drivers of performance | Clear attribution by engine and by position |
Engine I
Factor rotation.
Captures shifting leadership among global investment styles. The universe is seven global UCITS factor ETFs: the global market, value, momentum, size (small cap), minimum volatility, quality and growth. Every month the engine runs the same four steps.
Measure
Measure how each style ETF has performed over the past 3, 6, 9 and 12 months.
Weight the horizons
Give more weight to the horizons that have recently predicted best, adjusted for calm or turbulent markets.
Select
Hold the top 3 styles. In choppy, trendless markets the bar is raised; if nothing qualifies, the portfolio is kept.
Size
Weight by risk: calmer ETFs get a larger share, with a modest tilt toward the strongest signals.
Engine II
Thematic alpha.
Only themes that beat their factor exposures earn capital. The engine groups 35+ thematic ETFs into 14 theme funds and tests each one every month; only the part of a theme’s return that the market and investment styles cannot explain counts as alpha.
- AI software, data and cloud
- Semiconductors and AI infrastructure
- Cybersecurity
- Clean energy, EV and batteries
- Healthcare, biotech and ageing
- Aerospace and defence
- Power grids, water and infrastructure
- Circular economy and food
- Blockchain and digital assets
Themes shown are illustrative, not current holdings. Each theme fund equally weights ETFs with a similar objective, so overlapping products count once.
- Alpha test
- Return beyond factors is positive and statistically significant, with at least one year of history.
- Top 6
- The strongest themes, ranked by alpha.
- Top 3
- Core holdings: the themes with the strongest momentum, sized by risk.
- Watchlist
- At most 30%: promising themes not yet statistically proven.
Stress protocol
When an engine falls 20%.
The protocol is the same for both engines; only the re-entry threshold differs. Recovery is judged on a shadow portfolio that keeps tracking the engine while it is invested defensively.
Trigger
The engine falls 20% from its peak. Drawdowns are checked daily.
Defend
It moves to 50% EUR government bonds and 50% physical gold.
Re-enter
It re-enters once a quarter (factor engine) or a third (thematic engine) of the loss is recovered, confirmed over 6 trading days.
Reset
Normal rotation resumes. A new fall is measured from this point.
Allocation and risk management
Allocation within hard limits.
The allocator starts from equal risk between the engines. Relative momentum tilts the mix by at most 20 percentage points, and the tilt flattens out as signals get stronger.
- Risk balance
- The riskier engine receives less capital.
- Allocation bounds
- Factor engine 30 to 70%; momentum tilt at most 20 percentage points.
- Turnover control
- Quarterly review; changes below 5% are not traded; reversals at most 15 percentage points per quarter.
- Drift
- Rebalance to target when drift exceeds 5% at month end; otherwise no trade.
- Leverage
- At most 130% gross and 110% commitment; no structural leverage.
- Instruments
- Listed ETFs and ETCs on regulated exchanges only, with full look-through transparency.
- Discretion
- The Manager follows the model and deviates only in exceptional cases where the interests of the Fund so require.
- Changes
- Parameters may change in line with the Information Memorandum. Material changes are announced two months in advance, with a free exit window.
Evidence
Built on published research.
Factor returns are persistent: winners keep winning and losers keep lagging, a pattern that can be harvested systematically. Ehsani and Linnainmaa (2022), Journal of Finance; Gupta and Kelly (2019), Journal of Portfolio Management.
Thematic narratives can grow into systematic return drivers beyond traditional market and style factors. Candès et al. (2025), Financial Analysts Journal; Braga, Vacca and Zoia (2026), European Financial Management; Bybee, Kelly and Su (2023), Review of Financial Studies.
Third-party research is cited for context and is believed to be reliable but has not been independently verified.
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