|
Page 9 of 10
AI Portfolio Performance (objectives should be evaluated over 36-month periods)
Like the Hedge Fund Research Global Hedge Fund Index (HFRX), AI's secondary objective is to provide an absolute return (consistently positive returns). As of March 31, 2009, hedge funds are down -24.6% while the AI 75-50 Portfolio is up 4.6% since the S&P 500's peak in October 2007. The AI 75/50 model has outperformed its benchmark, the HFRX and the S&P 500 (Figure 12). AI 75-50's primary objective is to capture 75% of the S&P's upside and 50% of its downside, which requires us to hedge beta nimbly while maintaining core beta (equity and bond exposures). The portfolio's 11.7 annualized standard deviation (ASD) is higher than that of the HFRX but much lower than that of the S&P's volatility since the market's peak.
Upside & Downside Risk
In our last InPerspective, our view was that there was significantly more risk from being too short (low beta exposures). We saw the market as being extremely oversold after being down about 60% since its prior peak. This is from last month's issue.
"Oversold Panics, even those that lead to depressions, experienced 30% to 90% counter trend rallies while remaining in a bear market."
Even if we were wrong, we thought it best to add beta in late February and early March 2009. As of April 13, 2009, the S&P is up nearly 29% off its prior low.
Over the past five weeks, the market gave us an opportunity to reduce beta and to reestablish defense. Since last month's lows, we added back short exposures through the repurchase of the UltraShort Consumer Services ProShares (SCC). We also initiated exposure in the ProShares UltraShort MSCI EAFE (EFU) and added to the ProShares UltraShort Lehman 20+ Year (TBT). In addition we sold the PowerShares FTSE RAFI US 1000 (PRF) and the Telecom Holders Trust (TTH). We also sold all of the PowerShares UltraLong Crude Oil ETN and invested the proceeds in the Energy Select Sector SPDR (XLE).
All positions and our strategy view for all holdings are listed in Figure 13, along with our beta-non beta allocations and themes (see the February InPerspective for more).
As of March 31, 2009, we were up 4.4% month to date, while also up 5.9% year to date.
|
RSS
