- momentum strategy
- uses inverse-leveraged ETPs as hedge
- rebalances daily
Four-Fifteen is a proprietary momentum strategy by TuringTrader.com. We first introduced the strategy in February 2021.
Four-Fifteen aims to combine the advantages of tactical asset allocation with tax-efficiency. To do so, the strategy uses complex leveraged ETPs to hedge its stock market exposure, depending on the current market regime.
While technically Four-Fifteen follows a daily rebalancing schedule, it changes its asset allocation only infrequently, resulting in low maintenance requirements.
The operation of Four-Fifteen can be summarized as follows:
- during bull markets, hold S&P 500
- during bear markets, hold 60% S&P 500 and the remainder in triple-leveraged inverse S&P 500, and triple-leveraged U.S. Treasuries
- switch between market regimes using TuringTrader's Market Vane indicator
Thanks to using an inverse-leveraged ETP to hedge the exposure to the S&P 500, Four-Fifteen can hold onto 60% of S&P 500 shares throughout. In doing so, the strategy combines tactical asset allocation with tax-efficiency.
For a detailed discussion of the inner workings, investors are encouraged to read our background article.
While Four-Fifteen may hold up to three ETPs at a time, its net exposure toggles between only two asset classes: the U.S. stock market and U.S. Treasuries. This concept of serial diversification successfully avoids concentration risks. However, holding only a single asset class at a given time results in a tail risk identical to that of the respective asset class.
Based on Monte-Carlo simulations of historical returns, Four-Fifteen's risk profile is almost identical to that of a passive 60/40 portfolio.
Returns & Volatility
Four-Fifteen handily beats the 60/40 benchmark in most years. As a result, the strategy continually gains over its benchmark, with only brief periods of underperformance.
Account & Tax Considerations
To meet its tax-efficient objective, Four-Fifteen is severely limited in its trading activity. We specifically designed the strategy to be used in the context of a meta-portfolio, namely All-Stars Tax-Efficient.
Four-Fifteen trades infrequently, on a schedule set by Market Vane. These trades only affect 40% of the portfolio value, leading to a tax burden similar to that of a passive 60/40. The strategy works best in taxable accounts. If tax-efficiency is not of significant concern, other portfolios most likely offer better risk-adjusted returns.
To hold up to three ETFs with their required weighting, Four-Fifteen requires a minimum investment of $5,000.
- v1, February 2021: Initial release.
This table shows the portfolio's key performance metrics over the course of the simulation:
The following chart shows the portfolio's historical performance and drawdowns, compared to their benchmark, throughout the simulation:
Download as CSV
This chart shows the portfolio's annual returns:
The following charts show the Monte-Carlo simulation of returns and drawdowns, the portfolios 12-months rolling returns, and how the portfolio is tracking to its benchmark:
The portfolio last required rebalancing after the exchanges closed on . Due to fluctuations in asset prices, the exact allocations vary daily, even when no rebalancing occurred. The current asset allocation is as follows: