MS - Real Trading Results

The investment objective of multi-strategy portfolio is to deliver consistently positive returns regardless of the directional movement in various markets. In general, the risk profile of the multi-strategy portfolio is significantly lower than equity market risk. The diversification benefits help to smooth returns, reduce volatility and decrease single-strategy risks.

Risk-adjusted returns (Sharpe and Sortino Ratio) of my individual strategies are significantly improved by strategy diversification. MS is a multi-strategy, i.e. combination of the FXQ, FXI, FXB, FXC, VT, VO and SPQ trading strategies. MS started with only 3 strategies (FXQ, FXE, VT), and two more strategies (FXI and FXB) were added in January 2013. In June 2013, FXE was replaced by VO, and in August 2013 FXC was added. The latest strategy added was VA (February 2014), for a total of 7 strategies. The old VA strategy was redesigned and replaced by a newer version of VA on September 1, 2015. More about the multi strategy optimal portfolio construction (using 7 strategies - FXQ, FXI, FXB, FXC, VT and VO - their current versions) can be found on the MS - Back Testing page. Real trading results before February 2014 were achieved with the older (or then not yet introduced) versions of strategies.

By retaining results of the replaced (less efficient) strategies we avoid the "survivorship bias". The combined performance contains the performance of the existing strategies, as well as performance of the failed and replaced strategies.

I. RATES OF RETURN (ROR) AND VAMI CHARTS OF A DIVERSIFIED PORTFOLIO

(Based on Real Proprietary Trading Results)

Below are given hypothetical (hypotheical are just the portfolio weights) composite equity (VAMI) curves of the FXQ, FXI, FXB, FXC, VT, VT and SPQ programs combined. Rates of return in component strategies are based on real proprietary trading results. Composite rates of return are solely given as an illustration of trading program combined performance. To take advantage of diversification and decreased drawdowns, the combined strategy trades the following portfolio composition:

Portfolio composition:

   I. Mar/01/2012 - Aug/31/2012: 33.3% FXQ, 33.3% FXE, 33.3% VT                                                                                (Initial portfolio composition)

   II. Sep/01/2012 - Jan/31/2013: 25% FXQ, 25% FXI, 25% FXE, 25% VT                                                                          (FXI added)

   III. Feb/01/2013 - May/31/2013: 20% FXQ, 20% FXI, 20% FXB, 20% FXE, 20% VT                                                         (FXB added)

   IV. Jun/01/2013 - Jul/31/2013: 20% FXQ, 20% FXI, 20% FXB, 20% VO, 20% VT                                                            (FXE replaced with VO)

   V. Aug/01/2013 - January/31/2014: 16.67% FXQ, 16.67% FXI, 16.67% FXB, 16.67% FXC, 16.67% VT, 16.67% VO          (FXC added)

   VI. Feb/01/2014 - Aug/31/2015 - 14.29% FXQ, 14.29% FXIA, 14.29% FXBQ, 14.29% FXC, 14.29% VT, 14.29% VA (old), 14.29% VO   (VA added)

   VII. Dec/01/2015 forward - 14.29% FXQ, 14.29% FXIA, 14.29% FXBQ, 14.29% FXC, 14.29% VT, 14.29% VA (new), 14.29% VO          (old VA replaced by a newer version)

   VIII. Mar/01/2018 forward:  14.29% FXQ, 14.29% FXIA, 14.29% FXBQ, 14.29% FXC, 14.29% V1, 14.29% SPQ, 14.29% V4                (VA replaced by SPQ)

 

Trading was overleveraged by 20%.These strategies were real trading, but in separate accounts. The combined performance was calculated by combining returns from all strategies, using the following formula (after February 1, 2014):

MS.CombinedROR = 1.20 (0.143FXQ.ROR + 0.143FXI.ROR + 0.143FXB.ROR + 0.143FXC.ROR + 0.143VT.ROR + 0.143VA.ROR + 0.143VO.ROR)

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Monthly ROR Table (Before and After Performance Fees)

    

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

VAMI

2011

See back testing results of a 7 strategies portfolio - 1,000.0

2012

- - 0.84% 0.67%* 1.06% 0.85%* (0.54%) (0.54%)* 3.17% 2.65%* 0.83%  0.66%* 1.67% 1.34%* 0.21% 0.17%* (0.28%) (0.28%)* (1.03%) (1.03%)* (0.62%)(0.62%)* 5.33% 3.87%* 1,053.3 1,038.7*

2013

(0.06%) (0.06%)* 1.66% 1.66%* (1.20%) (1.20%)* 1.56% 1.56%* (1.46%) (1.46%)* (0.71%) (0.71%)* 2.57% 2.50%* (0.16%) (0.16%)* 1.11% 0.92%* 0.98% 0.78%* 0.01% 0.01%* 0.17% 0.13%* 4.47% 3.97%* 1,100.7 1,079.9*

2014

0.52% 0.42%* 1.86% 1.49%* 0.11% 0.09%* 0.39% 0.32%* 0.76% 0.61%* 0.26% 0.21%* (1.13%) (1.13%)* 0.39% 0.39%* (1.53%) (1.53%)* 0.68% 0.68%* 0.93% 0.93%* (1.71%) (0.71%)* 1.49% 0.71%* 1,117.1 1,087.6*

2015

0.02% 0.02%* 3.27% 3.10%* 0.73% 0.59%* 0.89% 0.71%* 0.58% 0.46%* (0.14%) (0.14%)* 1.89% 1.54%* (3.46%) (3.46%)* 0.49% 0.49%* 2.67% 2.67%* (0.53%) (0.53%)* (1.39%) (1.39%)* 4.96% 3.98%* 1,172.5 1,130.9*

2016

(0.65%) (0.65%)* 1.30% 1.30%* 3.52% 3.16%* 0.15% 0.12%* 1.75% 1.40%* 0.95% 0.76%* 0.46% 0.37%* 0.26% 0.21%* (0.40%) (0.40%)* (1.34%) (1.34%)* 2.04% 1.98%* 1.60% 1.28%* 9.95% 8.40%* 1,289.2 1,225.9*

2017

1.34% 1.07%* 0.45% 0.36%* 1.31% 1.05%* (0.20%) (0.20%)* 1.38% 1.14%* (0.25%) (0.25%)* (0.54%) (0.54%)* (0.05%) (0.05%)* 1.71% 1.54%* 0.42% 0.33% 0.46% 0.37%* 1.30% 1.04%* 7.55% 6.00%* 1,386.5 1,299.4*

2018

(0.75%) (0.75%)* (0.37%) (0.37%)* (0.93%) (0.93%)* 0.16% 0.16%* 1.37% 1.37%* (0.17%) (0.17%)* 1.92% 1.68%*           1.17% 0.94%* 1,402.8 1,311.7*

* Net of 20% performance fee, based on monthly High Water Mark

II. PERFORMANCE STATISTICS (Based on Real Proprietary Trading Results, Net of 20% Performance Fee)

Strategy Statistics

Reporting period

Mar/12 - Jul/18 (77 months)

Total return since inception of trading

31.17%
Return last 12 months 4.18%

Compound average annual rate of return (ROR)

4.32%

VAMI Index - hyp. growth of $1,000 since inception

1,311.7

# Profitable months / average positive ROR

50 / 0.98%

# Unprofitable months / average negative ROR

27 / (0.80%)
Kurtosis & skewness of monthly RORs 1.07 / (0.09)

% Profitable months

64.9%
Ratio avg. positive / avg. negative monthly ROR (Gain to loss ratio) 1.24
Maximum / minimum monthly ROR 3.16% / (3.46%)
Monthly profit factor (Profit to loss ratio); Ratio sum positive returns sum negative returns 2.29

Risk Measures

Annualized standard deviation of monthly RORs 3.99%
Annualized downside deviation (below the RF rate of return of 1% per annum) 2.54%

Sharpe ratio, annualized (RF rate of return 1.0%)

0.83
Sortino ratio, annualized (below the RF rate of 1% per annum) 1.31

Calmar ratio

1.25
Efficiency index 1.08
Alpha relative to the S&P 500 Index, annualized 1.52%
Strategy Beta & Correlation coefficient, relative to the S&P 500 Index 0.25 / 0.59
Jensen's alpha relative to the S&P 500 Index, annualized 0.74%
R-squared (coefficient of determination), rel. to the S&P 500 Index 0.34
Information ratio, relative to the S&P 500 Index (0.77)

Worst drawdown depth / duration (on end-of-month basis)

     (3.46%)      7 months

III. Nonstandard (Overleveraged) Portfolios

All returns and performance analytics discussed above are achieved in a "nominally leveraged" or "1x" multi-strategy portfolio. The 1x portfolio is quite conservative and even the most prudent investors will consider the risks reasonable. A client with higher risk tolerance, looking for higher returns, can assign a Designated Trading Size in excess of his account balance. Such notionally funded accounts (1.5x, 2x etc.) would have all return and risk characteristics increased by a factor of 1.5, 2.0 etc. Simply said, the 2x program would grow twice as fast as the 1x program, but also the 2x program drawdowns would be twice as large as the 1x program drawdown. Remember: any target return can be achieved by use of leverage; think of target risk (drawdown) when selecting the appropriate leverage.

 

Past Performance Disclaimer

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FOREIGN CURRENCIES AND EQUITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION AND INVESTMENT OBJECTIVES.

Composite Performance Disclaimer

THIS COMPOSITE PERFORMANCE REPORT IS HYPOTHETICAL AND THESE TRADING ADVISORS HAVE NOT TRADED TOGETHER IN THE MANNER SHOWN IN THE COMPOSITE. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY MULTI-ADVISOR MANAGED ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE A COMPOSITE PERFORMANCE RECORD SIMILAR TO THAT SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.