Performance Tailwinds and Universal Bond Exposure

Performance Tailwinds and Universal Bond Exposure2017-03-03T15:27:03+00:00
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  • Gordon Cooper
    Participant
    Post count: 18

    Scott-

    Could you address the following concerns about your suite of strategies:

    1) The strategy performance histories have been generated during the most perfect historical period imaginable with both US equities and bonds rallying essentially unabated (except for that one period of 6 or 7 quarters) for over 20 years.

    2) Also each strategy has very significant exposure to the US long bond (either TLT or EDV). Granted there is some solace for US bond investors as we watch Japanese Government bonds continue to rally even as their yields are much closer to approaching zero than in the US, but at some time such a perfect environment may come undone, and potentially quickly or violently.

  • Vangelis
    Moderator
    Post count: 156

    Good questions & thanks for posting here so others can join in.

    These systems will generally outperform, usually by a wider margin, relative to the general market, during times of correction and extended pullbacks. They will do that by rotating into assets that outperform during those periods. We almost look forward to that to further demonstrate that advantage – and you can see some of the impact via our strategy outperformance over the last 2 months. Key phrase here, of course, is “relative outperformance”. Only path I know for safety without risk (except the risk of going poor very slowly due to inflation) is a higher allocation to cash. Other systems would likely add even more value during bear markets, like short term daily mean reverting processes, but that is for another day.

    Treasuries are the wonderful magic, and this magic may fundamentally change at some point (at which point the strategies will not use treasuries as much ), however, they have blended well with SP500 for many decades. The most money I have consistently made every year for last 5 years is betting against CNBC/Wall Street & the Fed when they tell that next year is the year rates definitely will go up.

    Kind Regards,
    Scott

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