"๐๐ต'๐ด ๐ฏ๐ฐ๐ต ๐ธ๐ฉ๐ฆ๐ต๐ฉ๐ฆ๐ณ ๐บ๐ฐ๐ถ'๐ณ๐ฆ ๐ณ๐ช๐จ๐ฉ๐ต ๐ฐ๐ณ ๐ธ๐ณ๐ฐ๐ฏ๐จ ๐ต๐ฉ๐ข๐ต'๐ด ๐ช๐ฎ๐ฑ๐ฐ๐ณ๐ต๐ข๐ฏ๐ต, ๐ฃ๐ถ๐ต ๐ฉ๐ฐ๐ธ ๐ฎ๐ถ๐ค๐ฉ ๐ฎ๐ฐ๐ฏ๐ฆ๐บ ๐บ๐ฐ๐ถ ๐ฎ๐ข๐ฌ๐ฆ ๐ธ๐ฉ๐ฆ๐ฏ ๐บ๐ฐ๐ถ'๐ณ๐ฆ ๐ณ๐ช๐จ๐ฉ๐ต ๐ข๐ฏ๐ฅ ๐ฉ๐ฐ๐ธ ๐ฎ๐ถ๐ค๐ฉ ๐บ๐ฐ๐ถ ๐ญ๐ฐ๐ด๐ฆ ๐ธ๐ฉ๐ฆ๐ฏ ๐บ๐ฐ๐ถ'๐ณ๐ฆ ๐ธ๐ณ๐ฐ๐ฏ๐จ." โ George Soros
For our investors, ๐๐ฒ ๐ผ๐ณ๐ณ๐ฒ๐ฟ ๐ฎ ๐ฝ๐ฟ๐ผ๐ฑ๐๐ฐ๐ ๐ฏ๐ฎ๐๐ฒ๐ฑ ๐ผ๐ป ๐ค๐๐ฎ๐น๐ถ๐๐ ๐ฎ๐ป๐ฑ ๐ฃ๐ฟ๐ผ๐ณ๐ถ๐๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ ๐ณ๐ฎ๐ฐ๐๐ผ๐ฟ๐ combined with a macro timing element that was less susceptible to significant drawdowns in previous major recessions. The choice of the universe (S&P 500) is based on the fact that U.S stocks generate a higher average annual return than other international markets. Thanks to the strict rule of law, innovation power, and world dominance, we believe U.S. companies will continue outperforming the rest of the world.
๐ง๐ต๐ฒ ๐ฝ๐ผ๐ฟ๐๐ณ๐ผ๐น๐ถ๐ผ ๐ถ๐ ๐ฐ๐ผ๐ป๐๐๐ฟ๐๐ฐ๐๐ฒ๐ฑ ๐๐๐ถ๐ป๐ด ๐๐ต๐ฟ๐ฒ๐ฒ ๐บ๐ฎ๐ท๐ผ๐ฟ ๐ฒ๐น๐ฒ๐บ๐ฒ๐ป๐๐ ๐๐ต๐ฎ๐ ๐ฎ๐ฟ๐ฒ ๐ฒ๐ ๐ต๐ถ๐ฏ๐ถ๐๐ฒ๐ฑ ๐ต๐ถ๐ด๐ต๐ฒ๐ฟ ๐ฟ๐ถ๐๐ธ-๐ฎ๐ฑ๐ท๐๐๐๐ฒ๐ฑ ๐ฟ๐ฒ๐๐๐ฟ๐ป๐ ๐ผ๐๐ฒ๐ฟ ๐๐ต๐ฒ ๐น๐ผ๐ป๐ด-๐๐ฒ๐ฟ๐บ ๐ฝ๐ฒ๐ฟ๐ถ๐ผ๐ฑ:
โค Robustness of the businesses' profitability and their momentum
โค A long-Short premium of the quality factor
โค Macro timing of financial conditions and credit impulse
Since 1985, during the last eight worst drawdowns of the S&P 500 in crisis periods, the robust business profitability factor vs. weak has shown an average total return of 29.1% while the index was down 46.2%, underlying the importance of having higher-margin businesses in the portfolio during major recessions. Additionally, during the same period, companies with solid quality characteristics delivered an even higher average total return of 43.3%. To balance the long-short duration of those two factors macro timing model of financial conditions is introduced to cover the periods where drawdowns minimization properties are needed the most.
๐ง๐ต๐ฒ ๐บ๐ฒ๐๐ต๐ผ๐ฑ๐ผ๐น๐ผ๐ด๐ ๐ผ๐ณ ๐๐ต๐ฒ ๐ฝ๐ผ๐ฟ๐๐ณ๐ผ๐น๐ถ๐ผ ๐ณ๐ผ๐น๐น๐ผ๐๐ ๐ณ๐ผ๐๐ฟ ๐ฝ๐ฟ๐ถ๐บ๐ฎ๐ฟ๐ ๐๐๐ฒ๐ฝ๐:
โ First, the baskets of long and short candidates are created using a proprietary fundamental filter. Only the top 20% and the worst 20% of the universe survive the first step.
โ Secondly, a more detailed analysis is taking place, where companies' growth prospects, fair value, valuation, balance sheet quality, short interest, and other factors determine whether the company can proceed to the next stage. On average, only 56 companies survive stage 2 to get into the final long and short candidate lists. The model composition is updated annually when the full annual financial results are in the system.
โ In stage 3, the macro climate and broad financial conditions are assessed to identify the turning points in the valuation multiple expansion/contraction cycle. The signal is essential in long-short weights adjustment but is not the sole contributor to decision-making. Various nowcasting models work in an ensemble for higher forecast accuracy to produce the final probabilistic outcome.
โ In the final stage, complementary to stage 3, factors optimization is introduced to reflect the macroeconomic conditions and factors' performance properly. Candidates that have better or worse factor tilt are selected or replaced. New companies are added or removed using risk bands that foster better risk/reward entry and exit points to accommodate the rebalancing. The stochastic volatility process is the primary engine for producing probable maximum and minimum prices.
The strategy is rule-based and does not have a discretionary element or narrative-driven decision-making. Only companies that satisfy all the steps constitute the final portfolio.
We know that the market isnโt all sunshine and rainbows. The pendulum of market sentiment swings in both directions, usually to the extremes that force bull markets to converge to bear markets and vice versa. For example, in the 20th century, markets were in a bear phase for 28 years, and in the last 90 years, we have been in a bear market 35% of the time. Even if investors bought the lowest point of the dot com bubble burst, they would be at the same place after seven years. On average, bull markets are more common and have a longer duration, translating to an 8% average yearly return. But bear markets are vicious and much more potent in erasing returns and questioning the resilience of even the most patient investors.
๐ช๐ฒ ๐ฏ๐ฒ๐น๐ถ๐ฒ๐๐ฒ ๐ถ๐ป๐ฐ๐ผ๐ฟ๐ฝ๐ผ๐ฟ๐ฎ๐๐ถ๐ป๐ด ๐๐ต๐ฒ ๐๐๐๐๐ฒ๐บ๐ฎ๐๐ถ๐ฐ ๐ฎ๐ฝ๐ฝ๐ฟ๐ผ๐ฎ๐ฐ๐ต ๐๐ถ๐๐ต ๐ฎ ๐๐ถ๐บ๐ถ๐ป๐ด ๐ฒ๐น๐ฒ๐บ๐ฒ๐ป๐ ๐ฐ๐ฎ๐ป ๐ด๐ถ๐๐ฒ ๐ถ๐ป๐๐ฒ๐๐๐ผ๐ฟ๐ ๐บ๐ผ๐ฟ๐ฒ ๐ฏ๐๐ณ๐ณ๐ฒ๐ฟ ๐๐ผ ๐๐ถ๐๐ต๐๐๐ฎ๐ป๐ฑ ๐ฝ๐ฟ๐ผ๐น๐ผ๐ป๐ด๐ฒ๐ฑ ๐ฏ๐ฒ๐ฎ๐ฟ ๐บ๐ฎ๐ฟ๐ธ๐ฒ๐๐ ๐ฎ๐ป๐ฑ ๐ถ๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ ๐ฟ๐ฒ๐๐๐ฟ๐ป๐ ๐๐๐๐๐ฎ๐ถ๐ป๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ ๐ผ๐๐ฒ๐ฟ ๐๐ต๐ฒ ๐น๐ผ๐ป๐ด ๐๐ฒ๐ฟ๐บ.... Show More
