Does the Framework Actually Work?
Cumulative return, CAGR, Sharpe ratio, and max drawdown for PCS 500, PCS ESG 500, PCS 100, and PCS ARE, each built from a fully disclosed, no-cap construction rule applied to the same tier classifications the data products deliver.
Two Constructions, Fully Disclosed
Every figure below comes from one of two simple, rule-based constructions. No discretionary trading, no hidden weighting, no upper bound on any position as it compounds.
PCS 500 · PCS ESG 500 · PCS 100
- Every constituent scored quarterly; Tier 4 names are excluded from the portfolio entirely
- Remaining names (Tier 1 to 3) enter at their real, actual index weight. No equal-weighting, no caps
- Continuing holdings are never re-weighted between rebalances. A compounding winner keeps compounding at its own pace
- Rebalanced quarterly, in step with the underlying index
PCS ARE, Tier 1 Only
- Only Tier 1 names are held. This is the narrowest, highest-conviction cut of the framework
- Each new entrant receives equal weight among that quarter's Tier 1 membership
- Same no-reset philosophy: continuing holdings compound between rebalances rather than being trimmed back to an equal split
- Rebalanced quarterly
2019-08-01 to 2026-07-09 · ~7 Years
Full-Window Performance
Capital-appreciation only. No dividend reinvestment (a data-availability constraint, not a choice; see disclosures below).
Hypothetical, backtested results. No client account held these positions. Price returns only: no dividends, fees, or transaction costs are modeled.
| Product | Cumulative | CAGR | Sharpe | Max Drawdown |
|---|---|---|---|---|
| PCS 500 | +188.63% | +16.51% | 0.627 | -32.67% |
| PCS ESG 500 | +194.52% | +16.85% | 0.636 | -32.30% |
| PCS 100 | +344.17% | +23.98% | 0.801 | -35.58% |
| PCS ARE | +335.21% | +23.61% | 0.779 | -35.63% |
| SPY (benchmark) | +154.83% | +14.43% | 0.552 | -34.10% |
| QQQ, actual ETF (PCS 100 benchmark) | +280.37% | +21.24% | 0.727 | -35.62% |
These Portfolios Are Not Diversified by Mutual Fund Standards
Excluding Tier 4 and letting winners compound without a cap concentrates these books well past the diversification limits a registered '40 Act fund must observe.
| Universe | Avg Top-1 Weight | Avg Top-5 Weight | Quarters Top Holding > 5% |
|---|---|---|---|
| PCS 500 | 11.72% | 31.13% | 27 / 27 |
| PCS ESG 500 | 11.97% | 32.53% | 27 / 27 |
| PCS 100 | 19.01% | 50.41% | 28 / 28 |
| S&P 500 itself (benchmark) | 7.09% | 23.16% | 24 / 27 |
The honest context: the S&P 500 itself already breaches the standard 5% single-issuer diversification threshold in the large majority of recent quarters. Mega-cap dominance is a market-wide condition, not something these products invented. PCS 500 amplifies it (roughly +4.6 points on the top holding, +8 points on the top five, on average) by removing Tier 4 and letting the remaining names compound uncapped. That amplification is real and by design. It is not a flaw to be corrected, but it does mean none of these constructions would qualify as "diversified" under the Investment Company Act of 1940's 75-5-10 rule.
Better Risk-Adjusted Returns, Not Lower Risk
CAPM and the mean-variance tradition assume that risk and return move together in a symmetric manner. That assumption is the reason diversification rules exist. It is also the assumption these results argue against.
| Product | Volatility | Benchmark Volatility | Sharpe | Benchmark Sharpe |
|---|---|---|---|---|
| PCS 500 | 20.73% | 19.99% (SPY) | 0.627 | 0.552 |
| PCS ESG 500 | 20.97% | 19.99% (SPY) | 0.636 | 0.552 |
| PCS 100 | 25.31% | 24.56% (QQQ) | 0.801 | 0.727 |
| PCS ARE | 25.71% | 19.99% (SPY) | 0.779 | 0.552 |
Every one of the four products carries similar-to-higher volatility than its own benchmark, never lower. The Sharpe advantage comes entirely from additional return, not reduced risk. That is a deliberately narrower claim than "less risky," and it is the one that holds up: a portfolio earning more return per unit of a conventional risk measure that is itself unchanged or slightly higher.
The longer-horizon evidence is a separate, complementary finding, not a Sharpe ratio: in Fama-MacBeth cross-sectional regressions on 289 normal-market months from 1963 to 2024, the Tier 1 minus Tier 4 monthly premium is approximately 11.7% per year, after controlling for beta, size, book-to-market, and momentum. This is the same asymmetry, over 56 years, isolated from the standard risk factors that CAPM says should already explain it.
You're Licensing Data, Not a Strategy
The performance above demonstrates what one specific, fully disclosed construction has produced historically. It is not a description of what any product on this site delivers. Every data product ships only ticker and tier classification, exactly as described on each product's page: no weights, no position sizing, and never the underlying PCS score.
If a client wants to build a portfolio around this data, whether cap-weighted, equal-weighted, or any other construction, that portfolio is designed, sized, and executed by the client. Milligan Research licenses the classification; it does not manage assets, recommend trades, or offer this construction as an executable service.
All performance shown is hypothetical and backtested, not the record of an actual managed account. No fees, transaction costs, or slippage are modeled. Returns exclude dividends (a data-availability constraint of the underlying price series, not a methodological choice). No portfolio described here was actually traded with client money. Past performance does not predict future results.
Neither Michael Milligan nor Nina Milligan, CFP®, is a registered investment adviser nor holds a securities license. Nothing on this page constitutes investment advice, a recommendation, or an offer to manage assets.