- Long / Short Hedge Portfolio Performance Archive

Year of Whipsaws

2015 was a year of whipsaws for the core portfolios. Take a look at the chart below and you’ll see the allocation changes throughout the year. Green lines represent adding exposure, yellow reducing exposure (or adding a hedge), and red represents a market risk warning. The core portfolios added exposure early in the year only to reduce it just before the August drop. It was nice to sleep at night during the turbulence, but it didn’t help the portfolios much because we then added exposure just before the market started to dip again. If you were holding small caps the changes were more painful than if your portfolio was closer to Nasdaq or the S&P 500 Index (SPX). Overall, the portfolios did as expected in a flat year for the market. Without a direction, whipsaws are expected. The important thing to notice on the chart is that the core portfolios were 100% in cash or 50% long and 50% short just before the decline in August. In contrast, my market

Tags: sh, spx, vxz, xvz

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2014 Hedged Portfolio Performance

Published on January 6, 2015 by Blair in Long Cash Performance, Long Short Performance, Volatility Hedge Performance

During 2014 all of our portfolios lagged the market. Most of them by a significant margin. You’d think this would concern me, but it doesn’t. The purpose of a hedge is to position a portfolio for more than one outcome when market conditions are uncertain.This means a hedged portfolio will not track the market…by design. This is the reason that most people can’t hedge. They want to participate in every uptick in the market. The hedging strategies here at Downside Hedge are designed to track the market over very long time frames. They do so by avoiding losses during severe downturns at the expense of lagging during market rallies. The performance charts below provide some good examples. Our Volatility Hedge performed the best this year. It was up up 6.5%. It is our most aggressive portfolio because it only uses our Market Risk Indicator as a signal. It is 100% long when risk is low and 50% long and 50% hedged using a volatility product such as the iPath® S&P

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2013 Portfolio Performance

Published on January 1, 2014 by Blair in Long Cash Performance, Long Short Performance

2013 was a decent, but not great year for the Downside Hedge portfolios. The hedged portfolio performed the best (which is normal in an uptrend) gaining nearly 25% on the year. In contrast, the S&P 500 Index (SPX) gained roughly 30% for the year. The under performance of the hedged portfolio is a result of being hedged (to as much as 50%) early in the year. From late May the portfolio only had a few instances of hedging while at the same time the longs in the portfolio had their largest gains and outperformed SPX which allowed the portfolio to catch up somewhat. For official tracking purposes I use a couple of ETFs that have fairly high beta as the longs. I’m very comfortable with the gains considering the fact that the portfolio is designed to catch most of the upside, but protect against catastrophic losses. Below is a performance chart of the hedged portfolio. The long / cash portfolios substantially under performed the S&P 500 index with the core

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Market Showing Healthy Signs – Adding Long Exposure

Published on May 31, 2013 by Blair in Featured, Long / Cash Position, Long / Short Position, Long Cash Performance, Long Short Performance

Over the past week most of our core market health indicators improved. Our measures of the economy are still negative, but improving slowly. Our measures of risk showed some weakness that signals investors are getting a bit more concerned about the market. However, we believe that this is a normal condition when the market stalls rather than an indication of substantially lower prices. Our measures of market quality, trend, and strength jumped substantially this week. It is interesting that our measures of trend followed quality and strength in going positive especially since the rally out of the November lows has trended so strongly. It is an indication of how odd this rally has been from a underlying technical perspective. The positive changes in market trend is causing a change in our core portfolio allocations. Our Long / Cash strategies are now 80% long and 20% cash. Our Hedged portfolio is now 90% long and 10% short (using a simple short of the S&P 500 Index — or the ETF

Tags: market health, sh, spx

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Long / Short Portfolio Performance 2012

Published on January 2, 2013 by Blair in Long Short Performance

For the year 2012 our Long / Short Hedged portfolio gained 1.26%. Not a great year when measured against the S&P 500 Index (SPX) which was up 13.4%. The portfolio is up 104.2% since inception on 7/3/2006. Most of the under performance during 2012 was a result of being aggressively hedged twice where the market didn’t suffer a substantial decline. In addition, from mid March thru the middle of May the portfolio gave back some gains it had achieved during the rally from the first part of the year. We’re comfortable that the portfolio eked out a small gain considering all the potential tail risk events of 2012. On the chart above we compare the performance of the S&P 500 Index against our Long / Short Hedged portfolio from its inception on 7/3/2006. On the chart below the green lines represent when we added long exposure (and reduced hedges). The yellow lines represent reducing longs and increasing shorts (using a simple short of SPY) in the portfolio. The

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Year of Whipsaws

2014 Hedged Portfolio Performance

2013 Portfolio Performance

Market Showing Healthy Signs – Adding Long Exposure

Long / Short Portfolio Performance 2012

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