And that’s literally the worst period I could find. In almost every other period of longer than a few weeks since inception, CSM has quietly gone about the boring, beta-1 business of beating the market with pretty minimal variation from the S&P 500.
Is it guaranteed? Of course not. Nothing in investing is ever guaranteed. In fact, there are real risks here that aren’t captured by these traditional stats.
The 130/30 may have a beta of 1, but they do use leverage and shorting as core pieces of the methodology. Theoretically, if everything went terribly wrong, and the shorted stocks started running like crazy precisely when the levered long positions all go pear-shaped, you could do much worse than you would in a simple large-cap portfolio. However, the construction methodology makes that kind of magical misalignment pretty unlikely.
For now, at least, CSM is proof that better mousetraps occasionally do get created, and at least for a while, seem to work.
At the time this article was written, the author held no positions in the security mentioned. Contact Dave Nadig at [email protected] or follow him on Twitter @DaveNadig.