Ubique | January 2021 Update
If you've been listening to the PodCast, you'll be aware of some large changes which we've implemented in the last month or so, including a pivot in instruments being traded to express the fund. If you haven't, that's fine, that is what this monthly letter is for.
Since the appointment of Tim Jones, our new CIO, both he and I have been working on ways of beefing up the risk management across the portfolio, and to look at better and smarter ways of executing the trades. As such, we kept coming back to wanting to add a volatility-based strategy into the fund, to help mitigate those times when we see sudden movements in the market to help smooth out our equity curve and reduce drawdown. We then had to look at how we express this; as the Cboe Volatility Index (VIX) isn't a stock or an ETF etc. We explored options, futures and some other methods, but we kept coming back to a solution which offers additional benefits as well as yielding the best results. The broker we used with Trinity FX Fund, FXPrimus, offers the VIX as an instrument on their platform. This then got us thinking.
FXPrimus also offer gold, indices and many other instruments as well as the normal range of currencies, and as such, we adapted Golden Ratio to work on here instead of using an ETF as well. One issue though is that FXPrimus do not offer bonds, or sectors, which effectively kills off Sell in May and the Seasonal Sector Rotation strategy. Thankfully this wasn't an issue, as I have another strategy which works wonders with a track record dating back to 1934 which operates on the Dow Jones Index. It wasn't practical using an ETF to trade this, as it is a seasonal day trading strategy, but using the index through FXPrimus to trade it directly, keeps the edge in the strategy.
So, the fund now operates three strategies as before, with the Golden Ratio surviving, our volatility strategy called 'Fear & Loathing', and our Dow Jones strategy, called 'Keeping up with the Joneses'. We have fleshed out all the elements and have a compounded annual growth rate of around 24% (after all fees) and a max drawdown of under 30%. Presently, we are rebuilding the entire strategy from scratch using only the rules of each strategy to ensure there are no errors in our first workup. If this complete rebuild shows the same numbers, then we are hot to trot, as they say. An additional benefit of this is that unlike the ETF's which were created in 2008 onwards, these markets are much, much older, and our testing goes all the way back to 1990, as to encompass the 2001 tech crash, and the 2008 housing crash. This insight into how our strategies work during these times, as well as how they perform in conjunction with one another adds additional confidence in its robustness through good times, as well as bad.
Once this rebuild is complete and we are satisfied, all these numbers will go up on the website and placed into the monthly mailers. At this time, we also have numerous paper accounts open with FXPrimus, where we are walking this strategy forward in real-time, looking to see how much deviation on the price we are getting from what we are projecting within excel etc. So far, everything is within our accepted buffer, but it is early days. By the end of the month, we should know if the price we are executing at is consistent with the prices our testing is showing. If it is, we will then launch the live master account.
Looking now at the new broker, FXPrimus. They are a fully regulated currency broker who offers a range of other instruments as already mentioned. As they are situated inside the EU however, there are some restrictions as to client nationalities. They, and therefore Willow Oak, will not be able to accept any retail clients from the USA, France, Australia, Iran, Belgium, or North Korea. This is due to regulatory restrictions. If, however, a client is an accredited investor, this need not apply. As a company, we already have a Money Manager account with the broker and can accept client funds as of now. However, we are not willing to until our forward walk is complete and the numbers marry up.
More details can be found on the broker by visiting their website www.fxprimus.com and we will put up a load of info on them on the website, as fund security etc is an important part of this process for investors.
Hopefully, by the time the February letter is sent out, we will have a live master account open and will be in a position to start accepting client deposits. We will also look to get out two PodCasts this month as we want to articulate for the 'record' all the elements we have worked on, changed, or tweaked, so keep an eye out for them, for more in-depth information.
If you have any questions, or would like to know more about anything mentioned above, feel free to get in contact with us, and we'll happily have a chat with you about it.
For more in depth analysis, everything is on the website for inspection (www.willowoakadvisory.com/ubique).
Until next time, stay safe and swing easy.