Asset Management Performance Update, July 2020

Our asset management portfolios delivered outstanding results last month. Our strategies not only outperformed the benchmark, but they did so with considerably less volatility and smaller drawdowns.

(Source: Graphs based on Interactive Brokers' data)

  • By focusing on high-quality stocks with a tilt to minimum-volatility, growth and momentum equities, we strive for a well-balanced portfolio with correlation diversification. Given the Covid-19 crisis, we continue to favor software and healthcare companies as their balance sheets and cash flows remain rock-solid.
  • All of our holdings are being quantitatively selected based on a long-term oriented fundamental and technical scoring system
  • Option Generator AM focuses on covered option strategies which allow for volatility reduction in returns, resulting in better risk-adjusted returns
  • Based on our unique back-testing programming, we are able to identify the most appropriate strategies for our elite-performers watchlist. It’s a necessity that these tactics provide our portfolios with a long-term edge, regardless of market sentiment
  • Our goal is to resist the temptation of overtrading/over-rotating. In our opinion, companies that have shown resilience through tough times will continue to provide opportunities thanks to our strategy toolkit.
  • The MSCI All-Country World (in EUR) represents our benchmark. Since we are a Belgium-based asset manager, all managed portfolios are being hedged against changes in foreign FX.
  • Option Generator AM aims at earning an annualized return of 15+ % with a risk-adjusted return exceeding that of passive investing.
  • The portfolio discussed in this document was incepted on June 18, 2020.
  • Our portfolio delivered strong alpha in July as our covered short premium option strategies continue to benefit from elevated implied volatility. Compared to the benchmark, we generated a positive alpha of 5.77%.
  • Looking ahead, the portfolio is expected to generate 2.5% in positive time value over the next one month. The combination of being less exposed to equity markets and a steady positive daily cash flow will smooth fluctuations out.
  • Over the past month, resilient healthcare and tech companies have once again demonstrated their status of becoming the new safe assets. Buoyed by strong earnings reports and increased visibility, their favorable momentum is expected to last for several months.
  • Our portfolios continue to avoid high-beta and beaten- down stocks such as most REITs, banks, energy and airline companies. Historically speaking, very volatile stocks haven’t been great investment vehicles for our option strategies which relies upon consistency and reducing outlier moves.
  • Right now, almost all of our asset management portfolios deploy 3 strategies: portfolio overwriting (monthly covered-call writing), in-the-money covered- call writing and long call LEAPs (or long call diagonals).
  • Although implied volatility has come down over the past weeks, the VIX remains at the upper end of its range. As a result, we are not in the least worried about our minimal short vega risk (-0.14%).
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