Alpha Hunter Portfolio Update (Jul 8 2022)
SEE ACT WIN's flagship strategy to consistently outperform the markets with lower risk
Summary
8.6% annualized outperformance over S&P500 ETF with 57% lower risk than the S&P500 ETF using a highly scalable, long-only, no-leverage, fully-invested, global large-cap equity strategy. On-track to create one of the best risk-adjusted investing records of all time.
Please see the introductory post on Alpha Hunter to understand it better.
Alpha Hunter Portfolio (Jul 8 2022)
The portfolio is moved back into full equity exposure now and new rounds of alpha picks have been implemented
Here are the portfolio characteristics as of Jul 7 2022:
Alpha Hunter Strategy Results
Here is a chart of the alpha generated vs S&P500 over time, net of all fees:
The steep fall in alpha during the middle of March 2022 and early May 2022 is not fully attributable to the Alpha Hunter stock selection process as these instances were due to our allocation decision mistakes wherein the portfolio was ~60% in cash and upto 100% in cash respectively when the market was rebounding sharply. The impact of this mistake was a ~5% and ~3.5% erosion in alpha respectively. It was a risky deviation from the ‘Fully-invested almost all of the time’ characteristic of the strategy (see original Alpha Hunter strategy brief).
Yes, we repeated this mistake in May 2022. We have conducted a full review and are confident that we stand better now. In future, we will have much more stringent and effective criteria to take on significant cash allocation decisions. We do not expect such mistakes to occur again for a 3rd time.
For those of you that use Alpha Hunter as an information source to feed into your personal decision making, we sincerely apologize for the alpha destruction information this week. We empathize with the disappointments as this has had an alpha erosion impact on our personal portfolios too, in which a significant portion of our net worth is invested. We pledge to deliver better to the best of our ability.
Since Jan 12 2022 till Jul 7 2022, Alpha Hunter has returned -12.45%, whilst the S&P500 has returned -16.57%, implying an alpha of +4.12%. This corresponds to an annualized alpha of 8.7%.
Here is a summary of key performance and risk statistics, net of all fees:
SPX500 Total Return Index, Berkshire Hathaway Class B stock and Vanguard’s Total Stock Market Index are used as benchmark comparisons
Alpha Hunter outperforms other benchmarks; ~3.9% higher value added monthly index (VAMI)
Alpha Hunter’s outperformance comes with significantly lower risk:
Much lower standard and downside deviations; only 67% as volatile as the benchmarks
Much lower max drawdown; only 74% of the benchmarks’ max drawdowns
Low 0.40s beta; ~55% lower volatility than the market
Alpha Hunter’s Information Ratio (IR) vs the S&P500 Total Return Index is 0.38. This is a sharp deterioration from 0.57 the day before. This is caused by the asset allocation mistake over the past few days, where we were majorly in cash, and the market went up against us. Given that the strategy invests in large-cap global stocks, this places the performance of Alpha Hunter well within the top 25%ile of funds:
Source: Informa Investment Solutions
This is a major setback for Alpha Hunter’s consistency metrics since the fully invested strategy was consistently clocking in Information Ratios that placed it within or well within the top 5%ile of funds.
We are confident that we will move back into the top percentile performances with time.
Disclosure
Solutions must fit the circumstances and conditions present in the goal or problem. Without knowing these circumstances and conditions, it is impossible to prescribe a specific solution! This is a general principle.
We do not know our readers’ circumstances or conditions present in their financial status and goals. Hence, we cannot prescribe or recommend any specific solution. Therefore, please view what we write about as research that we are sharing with you, for you to consider in however you approach decision making.
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