Portfolio Convictions
Figure 1 above is composed of a focused list of indexes and assets classes and corresponding ETFs. Returns are through May 29, 2009.
The AI 75/50 portfolio weightings are labeled in the third column. Red highlights are for sectors that were shorted through 2x inverse ETFs (also red in Figure 2). Our long ETFs are either overweight (OW) or neutral weight (NW) relative to the Dow Jones Global Index.
A Closer Look
The AI 75-50’s primary objective is to capture 75% of the S&P’s upside and 50% of its downside, which requires us to hedge beta nimbly while maintaining core beta (equity and bond exposures). The portfolio’s 14.4 annualized standard deviation (ASD) is much lower than that of the S&P’s volatility since the market peaked in October 2007.
We have been very active since the end of May. We sold most of all gains made since the end of February 2009 in emerging market stocks, gold stocks and oil service stocks. Since May 28, we sold shares totaling 18.1% of our gross exposures. Figure 3 lists recent ETF and closed-end fund (CEF) trades.
