Average Daily Overperformance
We have discussed how an investor’s money would have grown with Unhedged over our first trading year versus investing in the market benchmark. Another way to visualize the relative performance of all three portfolios is to examine their daily overperformance (alpha) compared to their benchmarks. This is calculated by subtracting the daily return of each algorithm’s benchmark from the daily return of the algorithm itself, and averaging by the 260 trading days in our first year, from October 21, 2021 to October 20, 2022.
Here our performance can be seen in a slightly different light. Note that once again, Unhedged’s Sector Rotation is the star performer. No debate there. Recall that Sector Rotation ended the year +15.24% above its benchmark, the iShares Core Growth Allocation ETF. This is attributable to its average daily outperformance over the past year. Averages are affected by extreme values and on a number of days, Sector Rotation really thumped its benchmark, performance wise.
However, we also see that on average, everyday Unhedged’s Momentum investment option outperformed its benchmark the SPDR S&P 500 ETF Trust over the past year. The momentum algorithm may have disappointed us at the end of the year and finished -2.01% below its benchmark but for most of the year it was doing its job of outperforming the benchmark.
Interestingly enough, Industrial Activity which ended its first year, +5.46% above its benchmark, the SPDR S&P 500 ETF Trust, on average slightly underperformed for most of the year before making up ground post September to finish above its benchmark.
One Year Later
How have we done one year since fund inception? In one of the most challenging financial markets to launch a managed investment vehicle, two of our algorithms not only beat their benchmarks but also delivered a higher return than holding cash. All three have protected against deep market downtrends and smoothened returns. “Not too bad”, or “pretty good” we would say!
These results showcase Sector Rotation as the best performer. However, historical performance does not guarantee future performance. Our algorithms are lowly correlated and designed to work together—a meaningful allocation across all three benefits from this characteristic. Always consider the PDS when making investment decisions.
