DoubleLine: "Smart Beta, Meet Smart Alpha" [SLIDES]

DoubleLine Shiller Enhanced CAPE Strategy

What is Double Value?

  • The DoubleLine Shiller Enhanced CAPE Strategy creates “Double Value” for investors when combining two unique sources of value:
    • The Shiller Barclays CAPE® U.S. Sector Index attempts to shift portfolio exposures to the “cheapest” sectors of the large cap equity markets
    • DoubleLine’s Fixed Income strategy strives to shift its exposures to the “cheapest” sectors of the fixed income markets.
  • Both strategies attempt to offer a value play in their respective markets, and when combined investors have the potential to receive “Double Value.”

DoubleLine Shiller CAPE Structure

  • The distinct structure of the DoubleLine Shiller Enhanced CAPE® Strategy allows investors to simultaneously access returns of the equity markets and fixed income markets. By using an equity index swap, $1 invested in the strategy provides approximately $1 of exposure to each market.


What is the CAPE Ratio?

  • Acclaimed value investors Benjamin Graham and David Dodd noted in Security Analysis that equity valuations tend to follow a business cycle of 3-7 years
  • The CAPE® Ratio was formulated in the seminal 1988 piece1 from Professor Robert Shiller and John Campbell.
  • CAPE® = Cyclically Adjusted P/E (Price?to?Earnings)


  • The CAPE® ratio seeks to assess longer term equity valuation by using an inflation adjusted earnings horizon that is 10 times longer than the traditional P/E measure
  • Similar to the traditional P/E the CAPE® can be applied to a single equity, a portfolio of equities, a sector or a broad based index

CAPE Ratio for Value Investing – Sectors

  • By applying the CAPE® ratio, equity sectors showing a lower CAPE® ratio have tended to have higher subsequent returns


Relative CAPE Indicator

  • To account for idiosyncratic differences between sectors where CAPE® ratios have historically been of different magnitudes one can construct a Relative CAPE® ratio
  • This may allow investors to compare sector valuations on a level playing field


DoubleLine: "Smart Beta, Meet Smart Alpha"


Saved Articles

Are you a smart investor? Join tens of thousands of sophisticated investor reading our authoritative free newsletter

* indicates required

Opt out of occasional 3rd party offers

Congrats! Are you a smart person? We have a limited time offer for sophisticated and loyal readers like yourself.

Sign up today and get three months free

Use coupon code VIP19 or click on the button below

Limited time offer only expires 8/31/2019 or next 30 now just 2 subscribers whichever comes first – please do not share this discount with others