MYRS Performance Record

[William]

Hello, please can I ask a question about the MYRS performance record. I noticed that the performance started exceptionally strongly and then reduced in performance year on year with last year showing as a loss but then what seems to be a recovery in strong performance this year to date.

Please can I ask why this pattern has emerged and what caused the negative performance last year?

Does the strategy perform better in specific market conditions which happenned to be absent last year?

Thank you.

Will

[Frank Grossmann]

We had two major draw-downs of the S&P500 end 2015 beginning 2016. Both recovered quite quickly, but not only for the MYRS strategy this type of quick ups and downs of the markets is not good for strategies with monthly rebalancing. The strategies changed the allocation to safe treasuries only to miss the recovery a month later.
If one of these draw-downs would have been the begin of a bigger market correction, then however we would have been on the safe side.
Personally I think that anyway draw-downs of the ZIV ETF much less severe than draw-downs of stocks or index ETFs as we know that volatility will always revert to its mean level after quite short time. Seen like this, any draw down is rather a good investment opportunity.

[William]

Thank you Frank. Good to know that it is because of quick yoyo action in the markets which are not “time-able” events anyway. So despite unpredictable extreme volatility the strategy still held its own and didnt lose out. Good.

[Alex @ Logical Invest]

To add a technical perspective, if you look at the Vix term curve, especially the F4-F7 contango – or difference between the fourth and seventh month future, this is a good indicator for the MYRS performance harvesting the “roll yield” in normal times, when the curve is not inverted.

[William]

Thanks Alexander. As a basic rule of thumb are you inverse MT Vix Futures curve whenever it isnt in backwardation? and do you ignore the front month contango readings?

As a rule of thumb what % of the time is the MT curve in contango?

Which brings me to another query I had out of interest which is why you prefer ZIV to XIV? Is it because it is more stable and requires less frequent management? XIV/TMF correlations as far back as data available seem relatively similar to ZIV/TMF except XIV runs about double the growth to ZIV in periods of low volatility. Short VXX seems even higher.

[Alex @ Logical Invest]

The MYRS is price-action based, e.g. the ranking of the ETF drive the allocation – we´re not directly looking at the VIX curve, which is roundabout 80% of time in contango.

And here an article by Frank of why we prefer ZIV over XIV.

[William]

Great explanation much appreciated!

[Author]

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