Who is Stone Wall Financial?

Stone Wall Financial is a SEC-Registered Investment Adviser firm, founded by partners who collectively represent many decades of industry experience in technology, risk management, private wealth management, brokerage, private banking, financial planning, and securities analysis. Our firm delivers a full suite of our SHEP solutions as a Sub-Adviser to investment advisers, registered and exempt investment companies.

What is the SHEP Mission?

Our mission is the driving purpose behind all we do. We understand that trust is not built on just verbal platitudes, but through delivering desired outcomes. To do so, we seek to provide access to SHEP solutions through a variety of channels through partnerships we establish with institutions and their financial professionals. Only then are we able to deliver on our mission to provide financial security to individual investors through tactical strategies that may provide downside protection with enhanced upside performance.

SHEP is our proprietary algorithmic trading platform. It combines the power of a robust technology system with our SHEP Edge algorithmic formulae designed to mitigate clients from risk during major market downturns and make an informed rules-based, data driven decision for reentry.

The SHEP platform combines both Modern Portfolio Theory (MPT) and technical analysis to build and manage optimized portfolio constructs capable of addressing any client’s needs or circumstances. Each portfolio is anchored by a highly advanced quantitative technology platform and MPT principles of risk/reward maximization. Through integration to custodial platforms, SHEP is adhering to its strategy and pursuit to successfully protect and enhance portfolio performance. All securities in SHEP portfolios are individually optimized to seek protection and performance across ever-changing market cycles and conditions.

What sets our SHEP quantitative trading platform apart from others?

Our platform leverages proprietary advanced algorithms and real-time data analysis attempts to identify trading opportunities with precision. It’s designed for anticipating and preempting protective actions ahead of major market downturns that seek enhanced performance, while offering unique investment management that may not be available on other platforms.

How does your SHEP platform ensure accuracy in trading decisions?

We use a combination of AI augmented machine learning, statistical models, and historical data to optimize and continuously refine our SHEP algorithms. This helps to ensure that our trading decisions are based on the most accurate and up-to-date information.

How secure is your SHEP platform?

Security is a top priority. We employ state-of-the-art encryption, multi-factor authentication, and other security measures to protect our platform and ensure that our transmissions to manage our SHEP Advantage data transmissions are secure.

Can I gain access as a subscriber to the SHEP platform?

Presently, our SHEP platform is proprietary and not available as a subscription service. Stone Wall Financial operates as a Sub-Adviser, ready to partner with institutions and their financial professionals to provide access to our full suite of SHEP solutions.

How does AI with machine learning enhance the optimization of your SHEP model parameters?

Our use of AI with machine learning helps to automate the parameter tuning process in advanced algorithmic models, like the SHEP Edge. This is of great value to support our efforts to ensure that every SHEP security and model is optimized with greater efficiency and accuracy, reducing the risk of human errors in hopes of improving the model’s predictive capabilities.

What advantages does AI bring to the process of predicting future market trends?

AI is capable of processing vast amounts of data at high speeds, identifying complex patterns and trends that may not be apparent to human analysts. The ability to analyze and learn from large datasets enables AI features to make more accurate and timely predictions about future market movements.

Can you provide an example of how your successful implementation of AI augmented machine learning has brought value to your SHEP investment strategies?

The most notable example is how we leverage AI-driven, machine learning in our portfolio optimization strategy. By using machine learning with our rules-based, data driven algorithms we are able to better analyze historical data and market conditions. Our research has shown great potential for producing significant increases in portfolio returns while minimizing risk. For this reason, our SHEP models will periodically recycle our optimization process. Doing so increases our confidence that these models are better positioned for the opportunity to outperform other traditional methods.

Has your SHEP platform’s hypothetical back-tests been properly tested and validated for accuracy?

Yes, our platform has undergone extensive and rigorous testing using over 30 years of historical market data. We can confidently conclude the accuracy of our displayed hypothetical performance outcomes. We understand, to be credible, we had to evaluate SHEP’s responses across many market conditions and include both in-sample and out-of-sample periods of time. Our SHEP platform has endured a thorough examination by a highly credible third-party resource that concluded that the SHEP Model is logically constructed, internally consistent, and is, in all material respects, arithmetically accurate in terms of its formulae, algorithms, and calculations. CLICK HERE to review the SHEP Model Audit: Findings Report by BDO.

What is the purpose behind why Stone Wall Financial used both in-sample and out-of-sample testing before releasing SHEP strategies to the market?

In-sample testing allowed us to optimize our models by identifying patterns and relationships within the historical data, ensuring it performed well under known conditions. Out-of-sample testing, on the other hand, enabled us evaluate the model’s performance on unseen data. In doing so, we believe this provides a realistic measure of SHEP’s predictive power and robustness in real-world scenarios.

Why do so many emphasize that out-of-sample testing is so crucial for validating the reliability of models like SHEP?

Out-of-sample testing is crucial because it tests the model’s ability to generalize how it should respond to new, unseen future data. This step helps us ensure that we have avoided “overfitting.” Conducting these tests on all of our models ensures our strategies are not just tailored to past data but are likely to make accurate predictions in future market conditions.

What key metrics do you use to evaluate the performance of SHEP models during your hypothetical testing?

We use a variety of performance metrics, Sharpe ratio, maximum drawdown, Beta, Alpha, annualized returns, trading analytics and tax leakage, to evaluate our models. These metrics provide a comprehensive view of our SHEP models’ hypothetical results in risk-adjusted returns, stability, and overall effectiveness in different market environments, as measured against its relative benchmarks.

Are the traditional views true that active investment management cannot consistently time the market?

While it’s true that timing the market can be challenging, historical data shows that certain market indicators and economic trends can provide valuable insights. For instance, understanding and using a combination of momentum, trends, and technical analysis can help identify potential entry and exit points. It’s not about predicting the exact highs and lows but about making informed decisions based on data.

How are your SHEP models different from others timing the market with day or swing trading strategies?

Our model strategies are built to seek protection first, intentional on managing or mitigating risks of anticipated major market downturns. Although our trading frequency differs across our SHEP optimized securities, many may go months without a single trade. With precise focus on keeping clients on “the right side of the market,” we don’t rely solely on market timing. We build diversified portfolios using asset allocation, leading with risk management first, and then empowering the SHEP Edge to determine reliable reentry points. Our research has revealed effectiveness capable of increasing the potential for enhancing returns with less risk. The SHEP Edge is intended to be robust and reliable, poised to respond to the ever-changing market conditions without relying solely on timing.

How has the advancement in technology contributed to the success of algorithmic trading platforms like SHEP?

Advancements in technology and machine learning have significantly improved the ability of investment professionals to analyze vast amounts of market data in real-time. Predictive models and algorithms can be very different. Effectively built platforms like SHEP can identify patterns and trends that simply may not be visible to the human eye. There are universally accepted advantages with algorithmic trading platforms. One in particular, is the absolute, purely rules-based, data driven approach to decision-making, is not cloaked by human behavioral biases and subjectivity. With SHEP’s robust and more systematic approach to market timing, while not foolproof, it adds a layer of sophistication to the decision-making process.

What would be the experience of my clients should I choose to partner with Stone Wall Financial to access SHEP model portfolios?

With Stone Wall Financial as a Sub-Adviser, you remain in the driver’s seat as your clients’ primary adviser at all times. You are of course free to enlist or withdraw clients’ from SHEP® Advantage or Custom actively managed solutions at any time. Our role is to ensure timeliness in transmitting model changes through your TAMP or ours, consistent with the mode’s strategies you’ve selected. Your TAMP, in order to execute SHEP models on your behalf, will require your clients to sign a Letter of Authorization (LOA) allowing your TAMP partner to ensure timely trades of SHEP transmissions.

If I don’t have my own TAMP relationship, would I incur any additional expense to work through your partnership alliance with SMArt-X?

No. You would not incur any expenses to work with our partner, SMArt-X. All of the expense for onboarding, training, and migrating your client accounts are all covered by us. Additionally, we also cover the ongoing support costs SMArt-X provides you, as well as your own white-label website solution. The website will be your primary resource for overseeing your clients’ accounts, performance reporting, billing, and investment management needs.

Who
We Are

Our Dream is... Your Clients Realizing Theirs

To help your clients’ pursuit in accomplishing their dreams, our SHEP strategies are designed to successfully navigate capital markets and ever-evolving economic conditions. Hope is not a strategy and hope alone simply will not do.

Imagine a future where you and your clients can sleep well during major market downturns, confident that SHEP is striving to prudently preserve and grow their wealth. SHEP has been uniquely designed to reduce your clients’ exposure to risks, enhance performance, and increase the possibility of converting their dreams into reality in shorter time periods.

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Investment Strategy Profile

Stone Wall Financial selects Exchange-Traded Funds (“ETFs”) it believes investors have found most trustworthy and reliable to apply our SHEP algorithmic trading strategies. In pursuit of delivering risk-adjusted performance (a.k.a. “Alpha”), as compared to buy-and-hold conventions, each ETF undergoes extensive testing, uniquely optimizing each ETF’s proprietary 63 risk thresholds and buy-back metrics.

The Net Assets of the 30 SHEP-Powered ETFs

$1.52T - Equity Securities

$333.6B - Fixed Income Securities

$116B - Alternative Securities

The 30 Securities of the SHEP-Powered ETFs

7 Equity Securities

IVV – iShares Core S&P 500 ETF
SPY – SPDR S&P 500 ETF Trust
IJJ– iShares S&P Mid-Cap 400 Value ETF
IJH – iShares Core S&P Mid-Cap ETF
IJR – iShares Core S&P Small-Cap ETF
VBK – Vanguard Small-Cap Growth Index Fund ETF Shares
QQQ – Invesco QQQ Trust

15 Fixed Income Securities

SUB – iShares Short-Term National Muni Bond ETF
TFI – SPDR Nuveen Bloomberg Municipal Bond ETF
MUB – iShares National Muni Bond ETF
LQD – iShares iBoxx $ Investment Grade Corporate Bond ETF
SPIB – SPDR Portfolio Intermediate Term Corporate Bond ETF
VCIT – Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares
VCLT – Vanguard Long-Term Corporate Bond Index Fund ETF Shares
BIL – SPDR Bloomberg 1-3 Month T-Bill ETF
SHY – iShares 1-3 Year Treasury Bond ETF
VGIT – Vanguard Intermediate-Term Treasury Index Fund ETF Shares
VGLT – Vanguard Long-Term Treasury Index Fund ETF Shares
TLT – iShares 20+ Year Treasury Bond ETF
VRP – Invesco Variable Rate Preferred ETF
JNK – SPDR Bloomberg High Yield Bond ETF
ICVT – iShares Convertible Bond ETF

8 Alternative Securities

GDX – VanEck Gold Miners ETF
GLD – SPDR Gold Shares
PALL – abrdn Physical Palladium Shares ETF
PPLT – abrdn Physical Platinum Shares ETF
SLV – iShares Silver Trust
USO – United States Oil Fund, LP
GBTC – Grayscale Bitcoin Trust ETF
ETHE – Grayscale Ethereum Trust

Note: The data provided here does not represent Stone Wall Financial’s AUM profile; rather, it represents the collective Net Assets investors have entrusted to the 30 ETF’s Stone Wall Financial has optimized with its proprietary SHEP strategy.

Source: Stone Wall Financial Sub-Adviser. Net Assets data from VettaFi site as of 8/15/2024 and in USD unless otherwise noted.

The SHEP Advantage

Our SHEP Advantage is produced by combining our powerful SHEP technology platform with our proprietary algorithm, the SHEP Edge. Together, investors can remain confident that the automation to enable portfolios to respond to ever-changing market environments. With each successful risk mitigation trade cycle, starting with protecting first, and then followed by successful timely reentries, investors may benefit from compounding more and more shares over time—The SHEP Advantage.

Systematic Hedging

Employs the use of tactical shifts in asset allocation to reduce risk (not derivatives). The Edge provides us with reliable detection and response to risks ahead of anticipated market downturns.

Enhanced Performance

The Edge continuously monitors the ever-changing market conditions to discern timely reentries at collectively lower buy-back prices than previous sells.

The Shep Advantage

The compounding effect derived from accumulating new shares with each successful risk mitigation trade cycle.

The Edge

The Edge is our proprietary trading algorithm, empowered by 63 proprietary risk threshold and buy opportunity metrics, built on top of a reliable SHEP technology platform. The Edge is the key driver to all SHEP model portfolios and security investment strategies. The Edge has undergone extensive and rigorous testing as far back as 30 years across multiple securities, asset classes and investment styles. Our research and development revealed a keen ability to successfully time exit and reentry points that revealed the potential to protect in major market downturns while experiencing enhanced long-term performance.

Model Portfolio Construction

Risk-based asset allocation constructs uniquely managed to each security’s individual optimized algorithmic metrics, resulting in more ideal tactical rebalancing

Equity Strategies

We have optimized equity strategies covering a broad range of ETFs and individual stocks, diversified by company size, investment style, and industry sectors.

Fixed Income Strategies

Our fixed income strategies represent a wide range of core attributes necessary for diversification, including investment grade quality, sector, duration, and yield.

Alternative Strategies

Alternative strategies afford our clients the ability to invest in assets that fall outside of conventional categories, optimizing commodity and cryptocurrency ETFs.

ETFs Powered by SHEP

Our pursuit of SHEP powered ETFs is to deliver differentiated management to already popular ETFs in a “fund of funds” construct, or in support of others looking to boost their own ETF’s performance.

Our Partnerships Options

Stone Wall Financial partners with firms, their investment advisers, institutions, registered and exempt investment companies as Sub-Adviser for delivering active portfolio management and investment strategies. We champion a broad spectrum of SHEP optimized securities through a variety of offerings and distribution channels, partnering with TAMPs and ETF providers to deliver our solutions.

SHEP Advantage Portfolios

We provide access diversified models consisting of popular ETFs, built to help meet your clients’ unique risk profiles, time horizon, and objectives.

SHEP Custom Solutions
(Institutional)

Explore, by portfolio or by individual securities, how SHEP Edge may help to bolster your own strategies’ risk-adjusted returns.

SHEP Sponsored Securities

As a Sub-Adviser to registered and exempt investment companies, we pursue opportunities to release SHEP ETFs on the global exchanges.

Your ETFs Powered by SHEP

Have your own ETF, or interested in starting one? Explore how augmenting your own strategy with SHEP Edge may help you increase alpha.

Partners & Other Resources

Stone Wall Financial continues to grow a meaningful network of partners and other resources capable of contributing to our development and delivery of SHEP solutions.

Key Contributors

Stone Wall Financial has assembled a team of talented and innovative experts in their respective fields, spanning across risk management, regulatory compliance, technology, private wealth management, investment strategy, securities analysis, and data & analytics. Our team’s collective insight and precision is a key enabler to keep Stone Wall Financial and SHEP® at the forefront of product development and the adaptation to evolving technology in pursuit of delivering best-in-class risk-adjusted returns.

Who
We Are

Our Dream is... Your Clients Realizing Theirs

Investment Strategy Profile