Wednesday, October 26, 2016

2016 YTD Strategy Performance

2016 has been a very difficult year for money managers and investors alike. They had to withstand many shocks through the first half of the year, which resulted in elevated volatility environment.

Once the volatility subsided and the markets started rallying after the Brexit,  investors got all excited about prospects of the market. However, this joy was short-lived, as markets have not made any progress since mid-July. Sideways action of last 3+ months has been strenuous for market participants and financial media. Financial media has been coming up with new reasons for the market to move but every time market declines to show its hand in either direction (up or down). 

While markets were going sideways and had a very difficult year, our proprietary investment strategy has handsomely out-performed the market - by 14.3%.

SP500 Performance (Jan 1 - Oct 25) = 6.7%
Conservative Strategy (Jan 1 - Oct 25) = 21%

Cumulative performance since January in relation with SP500 (total returns) is shown below:

This out-performance is happening at a time when hedge fund, mutual fund and all other critical performance indices are poorly under-performing the market. 

Risk Management
Furthermore, the beauty of this portfolio is not only in its performance, its in the way it manages risk and generates Alpha. The portfolio, as of today, has a component weighted Beta of 0.37. In other words, it is almost totally uncorrelated with the market. Therefore, markets rise/decline will not impact the returns of this portfolio. This means that almost all the gains can be treated as Alpha, while Sharpe ratio is 1.7

Model is also agile enough to take advantage of trend changes and re-allocate prior to big market moves.

In short, this portfolio can help diversify your risk, amplify returns, protect gains and provide peace of mind, so that investors can focus on more important things like think about next big idea, theme or change.

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