1.5x Equity Accumulation Portfolio
Portfolio Specification
Assets
Policy
Rebalancing Interval | Quarterly |
---|---|
Weights Algorithm | Constant Weights |
Benchmark
Portfolio Description
Much of the research around accumulation suggest that an investor who is willing to utilize leverage would want ~1.5x exposure to equity. This data seems to assume an investor with a 100% equity portfolio. Therefore, I’ve built a more diversified portfolio that targets roughly a 1.5x beta to global equity and then allows a mean-variance optimizer to add diversifiers with the goal of maximizing diversification. Since equities tend to have low sensitivity to unexpected inflation over long time horizons, I added a constraint to keep the portfolio’s expected inflation beta greater than 0 to avoid taking on large amounts of inflation risk as the means for outperforming.
The result seems to be that we can achieve a similar return over the long-term to a 1.5x levered exposure to market-cap-weighted global equity, but with a lower max drawdown and standard deviation.
Policy Report
Backtest Report
From to (8y 1m 20d)
Returns (annualized)
Portfolio | 13.01% |
Benchmark | 9.49% |
Risk (annualized)
Portfolio | 22.98% |
Benchmark | 18.12% |
Sharpe (annualized)
Portfolio | 0.55 |
Benchmark | 0.47 |
Excess Return (annualized)
3.53% |
Tracking Error (annualized)
9.30% |
Information Ratio
0.38 |
Statistic | Portfolio | Benchmark |
---|---|---|
Downside Volatility | 24.46% | 19.96% |
Sortino Ratio | 0.52 | 0.42 |
Calmar Ratio | 0.31 | 0.23 |
Ulcer Index | 14.41 | 14.63 |
Max Drawdown | 40.24% | 36.65% |
VaR (99% Confidence) | $-5,345 | $-4,215 |
VaR (99.9% Confidence) | $-7,100 | $-5,599 |
Beta to Benchmark | 1.17 | N/A |
Value at Risk (VaR) is calculated off a $10,000 portfolio value.
Growth Charts
Historical Weights
Return Distribution
Excess Kurtosis
8.22 |
Skew
-0.49 |
Data Table
Factor | Portfolio | Benchmark |
---|---|---|
Credit Factor | 0.1561 | 0.1561 |
Duration Factor | 0.9017 | 0.9017 |
Emerging (Developed) Factor | -0.0407 | -0.0407 |
Inflation Factor | 0.4945 | 0.4945 |
Market Factor | 1.2361 | 1.2361 |
Size Factor | 0.1318 | 0.1318 |
Style Factor | 0.0576 | 0.0576 |
U.S. Tilt (Non U.S.) | -0.1794 | -0.1794 |
Yield Curve Factor | 0.0078 | 0.0078 |
Adjusted R2
Portfolio | 0.92 |
Benchmark | 0.87 |
Intercept
Portfolio | -0.00 |
Benchmark | -0.00 |