DBC Systematic — Rules v1.0

Effective: 2026-07-11 (seed deployment). Status: ACTIVE. Fund: DBC Systematic (QUANT_SYSTEMATIC). Benchmark: SPY.

1. Universe Definition

Eligible instruments are US-listed equities and ETFs meeting both screens as of each rebalance date:

• Market capitalization ≥ $2,000,000,000
• Average daily dollar volume (ADV, trailing 20-session) ≥ $10,000,000

Names failing either screen are dropped from the eligible universe regardless of existing holdings; positions that fall out of universe are held only until the next weekly rebalance, then exited per Section 5.

2. Composite Signal Construction

Each eligible name receives a composite score as the weighted sum of three standardized (z-scored) factor components, winsorized at ±3 std devs before combination to limit single-factor tail dominance:

• Momentum (40%): 12-month return excluding the most recent month (12-1 month momentum)
• Profitability/Quality (40%): blended quality proxy (margin stability, ROE, low accrual/leverage)
• Value tilt (20%): valuation discount vs. sector/universe median

Composite = 0.40×Momentum_z + 0.40×Quality_z + 0.20×Value_z.

3. Ranking and Portfolio Construction

The full eligible universe is ranked descending by composite score. The book holds exactly the top 25 ranked names. Position weights are proportional to each held name's composite rank/score, normalized toward ~95% net exposure, subject to a hard single-name cap of 5% of fund equity. Any name whose proportional weight would exceed 5% is capped and the excess redistributed pro-rata across the remaining top 25. A minimum of 20 names must be held at all times per IPS; if fewer than 20 eligible names remain, no forced trades occur but a breach memo is required within 24 hours.

4. Rebalance Cadence and Drift Bands

The book rebalances weekly in the designated Friday signal-computation window, with resulting orders executed at the next available platform-enforced rebalance window; orders submitted outside that window are rejected by the risk engine (treasurer may open an ad-hoc window). Between rebalances, positions are held within ±1% absolute drift bands versus target weight; a position drifting beyond ±1% may be traded back toward target inside the same window without waiting for the next full re-rank.

5. Exit Rules

A name is exited or trimmed at a weekly rebalance when: (a) its composite rank falls below in the full universe re-rank, (b) it no longer meets universe eligibility (cap/ADV), or (c) portfolio-level drift-band trading requires it. There is no discretionary profit-taking or stop-loss outside these rules.