We won’t take you on a trip down memory lane to relive the first half of 2020. It was rough and scary for everyone. Instead we’ll share with you the good news of how our clients fared.
Simply put, Huygens’s combination of active risk management and smart beta portfolio construction helped our clients avoid much of this year’s volatility, and put them well ahead of the broad U.S. equity market*.
Consider our active equity portfolios. The chart below shows the net asset value of our most conservative active equity portfolio vs the U.S. equity index benchmark* over the past two years.
Our equity market stress signal was bullish in the start of the year. It turned bearish on February 24th, repositioning our clients’ portfolios to overweight U.S. treasuries and underweight stocks. It held that state during all of March and most of April as stocks sold off steeply, bottomed, and began recovering. Our signal switched back to bullish in late April, repositioning our clients’ portfolios to capture gains from stocks’ recovery, and it held there through July.
The result has been that in the two years from August 2018 through July 2020, avoiding volatility has enabled this portfolio to deliver 7 times as much return per unit of volatility as U.S. stocks*. Its worst monthly loss was less than a third that of the U.S. equity index*, yet this portfolio delivered 10% more total return.
This is the heart of the Huygens investment approach: Our system for active risk management is designed to enable you to earn more total return by losing less.
*See our active equity portfolios page for more information.