VAMI presented above for this hypothetical composite portfolio is based on actual monthly performance presented pro-forma the fees described in the accounting notes below. The above benchmarks are also hypothetical composite results, please see the notes below for their constituents, weights and calculation. Please consider that any index performance is for the constituents of that index only and does not represent the entire universe of possible investments within that asset class nor are these instruments the only investments available to construct these portfolios. Limitations and biases to indices include survivorship, self reporting, instant history, etc.
Statera + iShares ITOT ETF
This analysis compares a hypothetical composite portfolio of $100K invested in Roe Capital’s Statera program and $100K invested in the iShares ITOT Total Stock Market ETF, combined into a $200K equally weighted portfolio.
We then compare the performance of this portfolio with several popular static asset allocation models, including a 60/40 portfolio, Ray Dailo’s popular All Weather Portfolio and Harry Browne’s Permanent Portfolio. The analysis shows that our hypothetical portfolio delivered equity-like returns with bond fund-like drawdowns during one of the most challenging periods in the history of US equity markets.
Combining an investment with no correlation to US Stocks (Statera) and a broad stock market investment (ITOT), this portfolio is designed with the goal of delivering lower volatility and lower drawdowns than typical equity index investments, yet still with the potential for equity-like returns regardless of market condition. We invite you to consider this allocation for your portfolio. (See disclaimers below).
HYPOTHETICAL PORTFOLIO COMPOSITION
Short Term Momentum
Total Stock Market Exposure
Historical Hypothetical Pro-Forma Performance
|Latest MTD ROR||1.92%||2.49%||3.30%||1.61%||0.42%||0.80%|
|Max DD (Monthly Basis)||-13.03%||-24.77%||-28.35%||-20.74%||-16.96%||-20.10%|
|Max DD (Daily Basis)||-20.12%||-33.92%||-35.93%||-21.54%||-18.80%||-22.39%|
|Correlation to S&P||0.81||1.00||0.88||0.98||0.64||0.74|
|Correlation to CTA||-----||0.81||0.75||0.80||0.54||0.62|
|Date of Update||2023-06-06||2023-06-06||2023-06-06||2023-06-06||2023-06-06||2023-06-06|
Hypothetical Monthly Non-Compounded ROR
This chart compares the drawdowns of this hypothetical portfolio with the above portfolios, global stocks, bonds and other CTAs. While global equities were hit hard in the pandemic reckoning of March 2020 (MSCI down over -25%), the Statera + ITOT hypothetical portfolio was only down -12.47%. It also recovered to new equity highs much more quickly than global stocks.
Drawdown ROR above is based on actual monthly non-compound returns net of all fees and compound ROR as reported by the indexes. Please see the disclosures below for information on how these returns were computed.
Daily hypothetical ROR is s based on actual monthly non-compound returns net of all fees. Please see the disclosures below for how these numbers were computed. Please see the disclosures below for information on how these returns were computed.
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ACCOUNTING NOTE: Results above are of a hypothetical composite $200K portfolio combining a $100k investment in both the Statera MR and the iShares ITOT Core S&P Total US Stock Market ETF using net of all fee actual returns for each program. The monthly profit and loss (P&L) for each program is calculated by creating a tracking account with a $100K starting nominal investment for each program and multiplying each investment’s net of fee rate of return by the nominal trading level of each tracking account at the prior month end. Trading P&L is not re-invested in the Statera MR tracking account of the portfolio until an annual portfolio rebalancing, while trading P&L is reinvested in the ITOT tracking account of the portfolio for each period. The portfolio is rebalanced annually to equal weighting on the first trading day of each year, rounded down to the nearest $10K for the Statera MR tracking account, with the balance allocated to the ITOT tracking account. Rates of return for the composite portfolio are presented in a compounded format by combining the net P&L from each tracking account and dividing by the portfolio trading level. Statera MR’s results are client composite results, with account fees ranging from the following: 0% to 2% management fee, 20% to 25% incentive fee, $5 to $15 round turn commission. The expense ratio for the ITOT is generally 0.03% and commissions at most brokers rage from $0 to $7 per order, please refer to the ITOT prospectus for more information. A $0 commission is assumed for the ITOT tracking account. Month to date performance is estimated using a tracking account with the following fee structures: Statera (2% management fee, 22% incentive fee, $10 round turn commission) | ITOT ($0 commission, dividends amortized over the business days in each month). Please review the returns of each individual program in this portfolio on subsequent pages of this document, as well as the disclosure document for each program. Returns are considered hypothetical as the programs have not traded together in the manner shown above, please be advised of the following:
This analysis compares a hypothetical portfolio of Roe Capital trading programs to hypothetical portfolios which recreate several popular static asset allocation models, as well as a few benchmarks. To replicate the performance of these portfolios, we create a hypothetical tracking account for each portfolio and benchmark. Each tracking account allocates hypothetical capital to exchange traded funds or a benchmark index representing the asset classes in the allocation model. The rate of return for each allocation for each period (daily and monthly) is determined by multiplying the compound rate of return for each asset (inclusive of amortized dividends, distributions and fees, exclusive of trading commissions as these funds trade commission free) to the ending nominal balance for the allocation for the prior period (daily or monthly). The rate of return for the portfolio is computed by adding up the profits and losses for each allocation and dividing by the ending nominal portfolio balance for the prior period. Whenever possible, we use Blackrock’s iShares ETFs in our hypothetical portfolios, given their liquidity, transparency and cost-effectiveness. Profits and losses are reinvested in each allocation and on an annual basis each portfolio is rebalanced to its original weighting. The constituents and investability of each portfolio are discussed below. Please note, our portfolio construction does not represent the entire universe of investments available to create these portfolios, nor do these portfolios represent the entire universe of asset allocation models available to investors. Past performance is not necessarily indicative of future results.
The 60/40 Portfolio is designed to mimic the returns of a portfolio with a 60% allocation to stocks and a 40% allocation to bonds. Our hypothetical portfolio allocates 60% of its capital to the iShares ITOT S&P Total US Stock Market ETF and 40% to the iShares AGG Aggregate Bond ETF. All constituents are directly investable, the portfolio rebalances this allocation annually and is inclusive of fees, dividends and distributions (rebalancing trades are computed commission free).
Popularized in his 2001 book “Fail Safe Investing”, Harry Browne’s Permanent Portfolio consists of an equally weighted allocation to stocks, long-term bonds, gold and cash. Each asset was included to correspond to four economic climates: expansion (stocks), deflation (bonds), recession (cash) and inflation (gold). Our hypothetical Permanent Portfolio is constructed as follows: 25% Stocks (iShares ITOT S&P Total US Stock Market ETF), 25% Long-Term Bonds (iShares TLT 20+ Year Treasury Bond ETF), 25% Cash (iShares SHY 1-3 Year Treasury Bond ETF) and 25% Gold (iShares IAU Gold Trust ETF). All constituents are directly investable, the portfolio rebalances this allocation annually and is inclusive of fees, dividends and distributions (rebalancing trades are computed commission free).
ALL WEATHER PORTFOLIO:
Created by Bridgewater founder Ray Dalio, the All Weather Portfolio is a risk-parity based asset allocation designed to ‘weather’ all economic environments. It consists of the following asset allocation: 30% Stocks, 40% Long Term Bonds, 15% Intermediate Term Bonds, 7.5% Gold, 7.5% Commodities. Our hypothetical All Weather Portfolio is constructed as follows: 30% Stocks (iShares ITOT S&P Total US Stock Market ETF), 40% Long Term Bonds (iShares TLT 20+ Year Treasury Bond ETF), 15% Intermediate Term Bonds (iShares IEI 3-7 Year Treasury Bond ETF), 7.5% Gold (iShares IAU Gold Trust ETF), 7.5% Commodities (iShares S&P GSCI Commodity-Indexed Trust). All constituents are directly investable, the portfolio rebalances this allocation annually and is inclusive of fees, dividends and distributions (rebalancing trades are computed commission free).
Included to compare performance to international stocks, we use the iShares Core MSCI Total International Stock ETF. It is directly investable, inclusive of fees, dividends and distributions and, as this is the only asset, there is no rebalancing.
SG CTA INDEX:
Included to compare performance to trend-following commodity trading advisors, the SG CTA Index is designed to track the largest 20 (by assets under management) CTAs and be representative of the managed futures space. The CTA Index is equally weighted, rebalanced and reconstituted annually and uses net of fee compound rates of return for each constituent. It is not directly investable.
ADDITIONAL DISCLAIMERS, DISCLOSURES AND NOTES:
THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CAN BE SUBSTANTIAL AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Prior to investing in a trading program with a registered commodity trading representative, investors need to carefully consider whether such trading is suitable for them in light of their own specific financial condition. In some cases, futures accounts are subject to substantial charges for commission, management, incentive or advisory fees. It may be necessary for accounts subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. In addition, one should carefully study the accompanying prospectus, account forms, disclosure documents and/or risk disclosure statements required by the CFTC or NFA, which are provided directly by the CTAs and/or the broker carrying your account. Trading methodologies which may be described on this tear sheet–including such terms as systematic, discretionary, day trading, swing trading, trend following, arbitrage, relative value, volatility trading, spread trading, options trading, contrarian, counter-trend, global macro, etc.–carry unique and specific risks. Please consult the disclosure document of this CTA for a detailed description of risk factors specific to this trading program. AN INVESTOR MUST READ AND UNDERSTAND THE CTA’S CURRENT DISCLOSURE DOCUMENT BEFORE INVESTING. A COMPLETE DISCUSSION OF FEES AND CHARGES ARE REPORTED IN THE CTA’S DISCLOSURE DOCUMENT. THERE ARE NO GUARANTEES OF PROFIT NO MATTER WHO IS MANAGING YOUR MONEY. ANY RESULTS FROM THE COMBINING OF CTAS OR OTHER INVESTMENTS SHOULD BE CONSIDERED HYPOTHETICAL AND HAVE THE ADVANTAGE OF HINDSIGHT.
The Sharpe Ratio is a statistical measure that indicates the average return minus the risk free rate divided by the monthly standard deviation of the return of an investment. Generally, the greater the value of this ratio, the better the risk-adjusted return of the measured investment. Our risk free rate changes daily, based on the closing price of the 13 week T-Bill rate as tracked by the CBOE’s $IRX index. For annual Sharpe Ratios, we use an average of the $IRX for that year.
Using compounded monthly returns, the Sortino Ratio measures the excess return over the risk-free rate (90 day T-Bill rate) divided by the downside semi-variance, resulting in a measure of simple return to bad volatility. Our risk free rate changes daily, based on the closing price of the 13 week T-Bill rate as tracked by the CBOE’s $IRX index.
Correlation represents the degree to which monthly rates of returns for this hypothetical portfolio correlate to monthly returns for each hypothetical portfolio and benchmark, with a maximum positive correlation of 1 and a minimum negative correlation of -1.
Volatility is a statistical measure of the dispersion of returns. In most cases, the higher the volatility, the riskier the investment. Volatility is often measured as either the standard deviation or variance between returns from that same investment. We calculate this volatility by taking the standard deviation of daily returns for each hypothetical portfolio, then annualizing them by multiplying that times the square root of the number of trading days in a calendar year.
DIFFERENCE BETWEEN PROPRIETARY AND CLIENT RESULTS:
Commodity Trading Advisors (“CTAs”) registered with the National Futures Association (“NFA”) and Commodity Futures Trading Commission (“CFTC”) are required to account for client trading results and proprietary results (results from their own trading accounts) separately. The results for the CTA programs on this tear sheet are from proprietary accounts of principals of the Advisor and presented pro-forma of the fees listed in this document. Your results will differ depending on the date you start, your fee structure and differences in execution between client and proprietary trading, which are separately executed by Roe Capital.
ADDITIONAL PERFORMANCE DISCLOSURES:
Below please find the performance of the individual programs included in the hypothetical composite portfolio in this document.
Statera Micro Program Proprietary Pro-Forma Results, John L. Roe Portfolio Manager
Pro-forma of $2 round turn commission, 2% management fee and 22% incentive fee.
Synthesis Index Program Proprietary Pro-forma Results, Dr. Umer Sayeed Shah Portfolio Manager
Pro-forma of $5 round turn commission, 2% management fee and 22% incentive fee.
PAST PERFORMANCE OF CLIENT ACCOUNTS:
Although the results of this portfolio are based on actual results, as these programs may not have traded in the manner shown here the results are considered to be hypothetical. As such, Roe Capital is required to disclose all client trading for the last five years. Please see the results of this trading in the composite trading records below. For more information, please consult our Disclosure Documents at our website, www.RoeCapital.com.
OPEN PROGRAM: Statera MR Program Client Composite Results | John L. Roe Portfolio Manager | Disclosure Document
OPEN PROGRAM: Synthesis Index Client Composite Results | Dr. Umer Sayeed-Shah Portfolio Manager | Disclosure Document
CLOSED PROGRAM: Omnium Client Composite Results | John L. Roe Portfolio Manager | Disclosure Document
OPEN PROGRAM: Statera Micro Client Composite Results | John L. Roe Portfolio Manager | Disclosure Document
CLOSED PROGRAM: Asymmetric | Bengt Berggreen & Jon Markman Portfolio Managers
CLOSED PROGRAM: Clearpath Program | Ralph Vince Portfolio Manager
CLOSED PROGRAM: UVER Program | Dr. Umer Sayeed-Shah Portfolio Manager