1/ As I watch the basket of retail favorite equities and BTC make new highs into the end of the year, I can only hang my head.
Because my performance was absolute rubbish this year.
What went right? What went wrong? Read on. 👇
2/ I should start by saying that my core mandates have historically sought to participate with equity market growth and preserve capital in equity market declines.
They embedded three key tilts:
1. Trend 2. Value 3. Size
(You can probably see where this is going...)
3/ Value and Size have largely been "unintended" byproducts of our portfolio design.
Specifically, we applied trend-following signals within an equally-weighted portfolio of equity sectors (e.g. Tech, Financials, Health Care, Staples etc).
1/ Some random thoughts on the reflexive impacts of commoditization of access in finance…
In other words, “what happens when we make something easy to invest in?"
2/ In 1991, Goldman Sachs launched the Goldman Sachs Commodity Index (GSCI). By the early 2000s, commodity futures were an popular, emerging asset class for many financial institutions.
3/ Institutional investors were ravenous for exposure, and grew their exposure in different commodity index-related instruments from just $15b in 2003 to $200b by mid-2008.
1/ Having lots of fun convos in the DM’s about positioning of systematic players (and how that positioning changes w.r.t. spot, realized volatility, and time).
I think an important equation to keep in mind is:
dL/dV = -T / V^2
2/ If we assume leverage (L) is simply equal to target volatility (T) divided by realized volatility (V) (i.e. L = T / V), then we find that the change in leverage w.r.t changes in volatility is equal to the equation above.
3/ What does this mean?
Since T is pretty much constant, it tells us that leverage changes (i.e. buying / selling pressure) will be due to changes in realized volatility (duh).