Enhancement Of The Treasury Hedge In Our Strategies

The GMRS has suffered this year from the sideways market and from the bad TLT Treasury performance. As GMRS is an international strategy we replaced TLT with a Top1 BRS strategy. This means that we are not limited to TLT, but always use the best of the BRS bond ETFs as a hedge. This combination makes the strategy very flexible, because on the equity side and on the bond side there is a good choice of ETFs. The risk adjusted return for the past is basically the same. Sharpe 1.47 for the new strategy and 1.46 for the old strategy. The real difference is only visible during the last 2 months where the new strategy using the BRS hedge managed a 7% out-performance from the original one. So, here we expect to see improvement in the coming months. Using BRS as a hedge is certainly a good strategy because BRS is a proven strategy which did very well these last years.

Global Sector Rotation Strategy (GSRS)

For the GSRS we also replace the TLT hedge with a BRS hedge. Here the new strategy shows a good improvement with an average annual performance going from 9.6% to 12.4% and a Sharpe going up from 1.1 to 1.5 for the last 10 years.

Here the improvement is bigger than for the GMRS because the Sector Rotation low-volatility algorithm favors larger allocations to the hedging component, TLT. This means that GSRS suffered more when TLT did not perform well. Now, going forward, the strategy should do better with the larger bond selection that the Bond Rotation Strategy provides.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.