In May of 2009 I was honored to be featured on the cover of Technical Analysis of Stocks & Commodities magazine for a hedged portfolio strategy I developed during the financial crisis of 2008. The portfolio performed very well in highly volatile market conditions. Since we are experiencing much of the same conditions today in the financial markets, I am releasing the article to investors for a limited time. Enjoy!
John Manley Stocks & Commodities Magazine May 2009
The Market Evolution Fund jumped to new all time highs scoring a 7.68% positive return for the month of September while the broad market (S&P500) suffered a – 7.18% loss for the same time period.
Year-to-date, the Market Evolution Fund is up 28% (to Sept. 30) vs. a -8.71% loss in the S&P500.
Master feeder account performance statements.
*All returns fully audited. This is a private fund and not open to the public.
Panicked market participants helped set the stage for a lucrative volatility arbitrage strategy on the S&P500 through the SPY. The play was mostly Delta neutral and profited on the decline of very expensive front month implied volatility and time. Back end Vega was hedged by a separate Dual Ratio Spread.
Duration of the play was 2.5 weeks and returned 67.5% on risk capital. P&L per each managed account.
As of Sept. 07, 2011 the Market Evolution Fund is showing a 227.1% total return over a 6 year period vs. a 7.8% return for the S&P500 covering the same time frame. Year to date the Fund is up 18.34% vs a -3.45% decline in the S&P500.
* This post is for informational purposes only and is not a solicitation of any kind. This is a private fund and not open to the public.
After tripling in value during late April 2011, the Market Evolution Fund is currently showing a 213.5% return (or a 36.18% annual return) as it closes in on its 6th Anniversary on August 29th of this year. This compares to a 10.43% return (or a 1.76% annual return) for the benchmark S&P500 over the same time period.
The Market Evolution Fund hit a major milestone recently by tripling in value since inception (5 years, 7 months), logging a 200.4% return. Conversely over the same time period, the broad market as measured by the S&P500 is showing a 8.27% return. For 2011 the fund is up 10.58% year to date (Jan. 01 to Apr 19).
The graphic below highlights the Master Managed Account (which feeds the other accounts). The master account was funded with $100,000 USD at the end of August 2005. Since that time there have not been any deposits or withdrawals in the account. As of Apr. 19th, 2011 the net liquidation value of the account is $300,416.76 USD.
This is a private fund and not open to the public. This announcement is for information purposes only and is not a solicitation or advertisement of any kind.
The graph below illustrates the absolute relative performance of the Market Evolution Strategies Mandate vs. the S&P 500 index. The performance shows a client managed account from inception (May 2007 to Dec 31 2010). The account was originally funded with $100,000 USD. After 3 years, 8 months the account is showing a 146% return or $246,065 USD in absolute terms. Conversely, $100,000 USD invested in the S&P 500 index over the same time period is now worth $82,170 USD.
From Jan. 01, 2009 to June 30th 2009 the Market Evolution Fund showed a 24.5% portfolio return and a 35% trading return ( 30% cash is always maintained) vs. a 1% gain in the benchmark S&P500 index.
*This is a private fund and not open to the public. This post is for information purposes only and is not an advertisement or solicitation of any kind.
The fund seeks to capitalize on evolving market structure, through the use of quantitative, adaptable options spreads. It targets three profit centers; volatility, time and price. Time in force ranges from two weeks to one year. All spreads are defined risk and can sustain a sudden, large hit to the markets with just a fraction of the damage of the typical “long only” fund. Recovery time is also a fraction of typical funds. With this premise, the volatility of returns is reduced substantially. Selection of spread strategies is dependent on current / forecast volatility readings, underlying fundamentals and technical setups. All executed spreads are adjustable via greek management.
Risk and Greek Management
Total portfolio risk and option greeks are managed through Interactive Brokers Risk Navigator and Stress Management tools in real-time and on a daily basis. Daily stress tests measures the portfolio change on a 1 day, 3% to 5% favorable or adverse move in the markets. By being able to model adverse, “what if” scenario’s in advance, adjustments are in the play book before the event happens.