To:          Key contacts

From:    Michael Markowski

Re:         Dynasty Wealth’s conversion to RIA

Date:     August 25, 2019

From January 1, 2018, through June 30, 2019, the Bull & Bear Tracker’s (BBT) back tested signals to trade S&P 500 ETFs, (symbols: SPY & SH) gained 68.1% vs. 9.2% from buying and holding the SPY.   The unleveraged monthly return averaged 3.7% for the BBT and 0.5% for the SPY.  The monthly gains from the back tested signals to trade the triple leveraged S&P 500 ETFs (symbols: SPXL and SPXS) averaged approximately 10%. 

The BBT was also less volatile than the S&P 500 for all of the monthly, 90-day, six month and 12-month investment time horizons which occurred during the 18-month period.  The table below depicts the Bull & Bear Tracker’s back tested signals and the S&P 500’s profitability percentages for each of the four types of investing time horizons during the January 2018 through June 2019 period:

To fully capitalize from the Bull & Bear Tracker’s track record, DW is in the process of converting to a SEC registered investment advisor.  In doing so it is entering one of the world’s oldest and most profitable professions; professional money management. 

Most recently the US money management industry had $82 trillion of assets under management (AUM).  The industry is the world’s most stable.  A client’s annual percentage of AUM fee is automatically deducted monthly or quarterly from a client’s bank or brokerage account and transferred to the to the money manager’s bank account. 

To maintain the efficacy of Bull & Bear Tracker’s algorithm its maximum AUM capacity to trade the unleveraged SPY and SH ETFs will be $3 billion.   Capacity for the triple leveraged ETFs will be $1 billion and these clients will have to pay a 20% performance fee.  The other cash flow algorithms that I had previously developed including the one, which was used to predict Lehman’s demise a year in advance and DW’s startups expertise will eventually increase AUM capacity to $500 billion.  

DW will not have any client acquisition, marketing or marketing expenses.  The majority of DW’s AUM is projected to come from the more than 30,000 independent registered investment advisor firms which have an average of $300 million AUM. 

The independent advisors who now charge an average annual fee of 1% will be eager to join forces with DW for several reasons:

  • Less than 5% of the firms have ever outperformed the S&P 500, the benchmark that all advisors are compared against.
  • The advisors will be able to raise their fees to the maximum permitted which is 2%. The raising of the fees will enable them to pay the Bull & Bear Tracker’s minimum fee of 1%.
  • The firms can utilize the Bull & Bear Tracker’s track record to increase their client bases and AUM.
  • They do not have a viable investment strategy to utilize during volatile markets and economic conditions.

The investors who are now utilizing the Bull & Bear Tracker’s aggressive and conservative signals to trade has steadily grown to above 1,000.  However, until Dynasty Wealth’s conversion to a registered investment advisor has been finalized it can-not generate a penny of revenue from the Bull & Bear Tracker’s traders.  Upon DW becoming a registered investment advisor everyone who is trading the Bull & Bear Tracker will be sent an email to notify them that the signals will no longer be available.  To have access to the algorithm, they will have to become a client of DW and pay a 2% annual management fee. 

To assist in the conversion and to establish operations the Dynasty Wealth LLC is now raising a maximum of $300,000 at the valuation that it has raised capital at since 2015.  The projected cash distributions to the new or existing partners who invest the $300,000 are projected to be $150,000 in 2020, $500,000 in 2021 and $1,000,000 in 2022.  These projections are based on the AUM that DW will have under management and also the following:

  • The plan is for DW to be managed by partners who already have significant stake in the partnership. Each of the individuals based on their existing stakes will receive cash distributions that are above the last $300,000 that DW will accept at its present valuation.    
  • The expenses and overhead to operate an RIA firm are insignificant.
  • The IRS requires that an LLC distribute 99% of its cash profits every year to its partners.

For details about why the probability is high that DW’s AUM projections will be reached read 8/10/19 partner memo

Finally, the plan is to enable those DW partners who want to sell their partnership units to have liquidity by the end of 2020.  This will be accomplished by their selling their partnership units to existing partners and to new investors at agreed upon prices.  

Read 07/12/19 Bull & Bear Tracker track record report.  

This link will provide access to Dynasty Wealth website.

Michael Markowski, career highlights, https://dynastywealth.co/about-dynasty-wealth/