All of the results below have been independently-audited in real-time by at least one third-party. Visit MarketSci.com for links to third-party audits and to learn more about accessing our strategies via a managed account or subscription.
Note to YK managed accounts: per Scott Daly, you returned a higher -0.4% (gross) for the month. There was a trading error in our tracking account that led to the -3.1% reported here. For consistency, I’m using the lower figure moving forward.
Performance has been tepid the last few months – we’ve been spinning our wheels not going forward or backwards as this market grinds up. I’m bored to no end with recent performance, but confident that all will be good and right in the world as this market settles in.
For a more detailed look at the breakdown in short-term mean-reversion the last few months (something we lean on heavily), refer to our most recent State of Short-term Mean-Reversion report.
One small update: we’re entering a new strategy niche this month with our Enhanced S&P 500 Index:
Most of our strategies target absolute returns, meaning they have little correlation to the broader market and are designed to profit regardless of market conditions.
The Enhanced S&P 500 Index is something very different. This program is designed to move like the market, but to do it with about half the downside risk. Put another way, we’re attempting to build a better, smoother S&P 500.
Specifically, we have four goals over the life of the program: (1) outperform the S&P 500, (2) reduce S&P 500 volatility by half (annualized based on monthly returns), (3) reduce average and peak S&P 500 drawdowns by half, and (4) exhibit greater than 80% correlation to the S&P 500 (based on monthly returns). [read more]
I’m not sure how much I’ll talk about enhanced indexes on this blog – this is really targeted towards institutional money and my readers tend to be high-vol. absolute-return types. But it’s out there and we’ll be updating stats monthly. Note that because this is not an absolute-return program, we will not be including it in our combined performance graph.
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The equity curve below shows our combined real-time monthly performance vs the S&P 500, assuming an equal investment in each family’s flagship program: MarketSci ProFunds (through 08/2009), RH S&P 500, YK (A and B), and Scotty.
COMBINED REAL-TIME PERFORMANCE vs S&P 500
SUMMARY OF ALL PORTFOLIOS SINCE INCEPTION
SORTED FROM MOST TO LEAST AGGRESSIVE *
Notes: (1) results account for transaction costs, but not subscription or managed account fees, (2) YK(B) returns reflect performance after addition of “abnormal market filter” in late October, 2008 (read more), (3) table sorted from highest to lowest measured volatility and may not reflect future performance.
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One of the ways I justify spending my time on this blog is it gives me an opportunity once a month to share these independently-audited trading results. I really hope you enjoy my ramblings each week, but developing these proprietary strategies is really what I do, and I invite you to find out more about accessing our strategies via a subscription or managed account.
Happy Trading,
ms
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Filed under: My Performance | 16 Comments
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My email: michael @ marketsci.com (remove spaces)
Congrats on the strategy results. They seem to be working pretty well.
One question I have is how do you go about getting your performance formally audited? Do you have to pay some specical company to go over your broker statements or is it more involved than that?
Do you know if this can also be done retroactively (ie if I wanted to audit my last 3 years of trading for example – or do you have to set it all up before)?
Thanks
Jez
RE to Jez: there’s really two levels of verification. The first would be something like Timer Trac or Theta Research (both of which we use). These are great for giving a potential investor graphs, stats, etc. from an unaffiliated third-party. Both could be done after the fact (by pulling data directly from your trading account), but both of those are targeted towards ProFunds/Rydex traders (like us). Cost is nil with Timer Trac and nominal for Theta. There are other services (Covestor, etc.) for intraday products but I’ve found they often don’t hold water if selling to financial professionals.
None of the above services are going to work for larger institutionals. These folks are going to be looking for signed audits of your trading accounts by an accountant (which is inherently after the fact). That’s not terribly difficult to set up (and you won’t need it until someone requests it) but there will be a more substantial cost involved.
Hope that helps.
michael
Also, does it cost a lot of money?
Timer Trac is free and not very difficult to set up or use.
What is the turnover of these strategies?
RE to Raj: I assume you’re asking how frequently they trade. Refer to the info at http://www.MarketSci.com. All programs potentially change positions once a day (but never more than once a day). YK and Scotty change at the close, and RH at Rydex’s special AM price. michael
Could the “Enhanced S&P” strategy be used as a hedging signal?
For example, suppose for some reason I expect IBM to outperform the market; I’d like to be just long IBM when the overall market is going up, but long IBM and short SPY when I expect the overall market to go down.
Could Enhanced S&P’s signals be used to time the switch in and out of the SPY hedge?
If so, I see a number of uses for it.
RE to Daniel: I think that would be stretching it a bit. The strategy is long-only (keep in mind I’m trying to maintain a high correlation to the index) – less exposure isn’t necessarily an expression that I expect the market to go down, just less confidence that it’s going to go up. michael
So the aim of Enhanced S&P is to deliver at least market-tracking returns, with much less than market levels of volatility. Have I got that right?
If so, that makes Enhanced S&P sort of the spiritual inverse of YK. YK embraces as much volatility as the market throws out, and tries for maximum return; Enhanced S&P sounds like it accepts whatever return the market is offering, and tries for minimized volatility. Both strive for the best possible “return per unit risk”, but one pushes up the numerator, and one pushes down the denominator.
RE “spiritual inverse” – well said. I would just emphasize the bit about maintaining high correlation to the index. That’s going to limit to some degree the ability to max return per unit of risk. Put another way, to a large extent allocation is driven by trying to maintain that correlation rather than positive expectations.
For someone coming from an absolute return world that might seem a little counter-productive, but these type of programs when done right (not to say we’ll do it right) benefit from gaining access to “equity” capital rather than “alt-investment” capital.
michael
hi, michael. i have been impressed w/ your performance both in bull and bear mkts.
have you considered applying these strategies intraday? if you believe they would or would not work, why or why not?
thx for your time and posts. i find them very educational.
anonymous
RE to anon: I think there’s a lot of opportunity there…it just doesn’t suit my personality. I have no desire to manage positions intraday. michael
Michael, the blogosphere misses your posts! Hope you are well and are just getting rejuvenated for more excellent articles.
I agree. We miss your thoughts, Michael.
Stay well.
Hi Michael, it’s almost mid-November and wondering if you’ll be posting the October performance as well as monthly State of Mean-Reversion? Tks!
Hello John – was negligent posting to the blog for Oct, but will cover both months in Nov. YK: -1.7%, Scotty: +4.0%, RH S&P 500: -6.6%.