I really appreciate your work. Looking at the Universal Investment strategies, with and without leverage, I noticed a few things and wanted to ask about it:
– It seems that any ticker in these strategies can have a maximum allocation of 60%. If I remember correctly, the previous versions without gold allowed going to 100%. What was your thought process for doing so? Reducing volatility at the expense of returns?
– Have you retested recently the old versions of the UIS to compare their performance against the new versions? What would be your conclusions in this case?
The reason or this change was that we always wanted to be hedged even if there is a sudden crash after a long bull period. Allowing a 100% SPY allocation we would have no hedge during the Covid crash and also during the 2018 December crash. There is nearly no difference between 60% and 100%. 2018 drawdown was 6% with the actual 60% setting and 10% with the 100% setting.