A strong gain for the portfolio strategy benchmark last week through Mar. 12 left out two proprietary strategies struggling to keep pace. Although the global opportunity set overall posted mixed results, the net change for Global 16 (G.B16), the benchmark, was out of reach for a pair of strategies during the trading week that just ended.
Of the two in-house active strategies, Global Managed Volatility (G.B16.MVOL) posted the stronger performance, rising 1.9% for the week. The gain lifted the portfolio to a respectable 3.6% year-to-date gain. Nonetheless, G.B16.MVOL remains behind the G.B16 benchmark, which targets the same 16-fund opportunity set, by a meaningful gap. Multi-asset-class beta, in other words, remains competitive this year. For details on strategy rules and risk metrics, see this summary.
Global Managed Drawdown (G.B16.MDD) is even deeper in the red on a relative basis vs. the G.B16 benchmark. Indeed, G.B16.MDD rose a tepid 0.4% last week and for the year is up just 1.0%.
G.B16.MDD continues to suffer from its risk-off bias. Although the strategy shifted to a moderately lighter defensive profile at last week’s close, nine of its 16-fund opportunity set remain in a risk-off position.
G.B16.MVOL, by contrast, is almost fully risk-on. Although the fund has periodically had risk-off positions, they’ve been relatively infrequent and few compared with G.B16.MDD — with the benefit of hindsight, those risk-off shifts turned out to be noise. The bias to stay at or near a full risk-on position for the overall portfolio continues to provide a strong tailwind, and one that remains out-of-reach for G.B16.MDD since the rebound in markets following the coronavirus crash in the spring of 2020.
A few weeks ago it appeared that the defensive stance of GB16.MDD might be paying off. But the run for cover still looks premature. If there’s a reckoning approaching for risk-on positions, so far it’s been limited to investment-grade bond markets, which continue to suffer from rising interest rates. Otherwise, risk-on remains tough to beat this year for globally diversified portfolios. ■