Quantbase Crisis Flagship
A fund that invests into an allocation of stocks that do well in crises, based on factors backtested to 1974. The fund detects a bear market using the high yield spread - when the difference between junk bond and US Treasury interest rates is above 6.5%.
*Vertical reference line denotes the end of simulated backtest data and the start of live performance data.
** Performance data is calculated using the average returns of all accounts with more than $100 invested in this strategy.
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Fund details
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Max draw down (of range)
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The fund uses 7 factors to determine which stocks to invest in and hold during a crisis and shortly after. These factors are: high asset turnover (revenue over total assets), positive net income, low trade volume, positive operating cash flow, de-leveraging, have a currently high net debt over enterprise value, and are considered a value stock. Empirical data and backtests show that stocks ranking highly on these factors do exceptionally better than the market over the 24 months proceeding a crisis.
Key Considerations
This strategy is aggressive in a bear market - it does not flock to safety. This is not for you if you are uncomfortable with falling returns at the start of a crisis or bear market scenario
The strategy hits its stride between 12 to 24 months after the start of a crisis, beating the market substantially in 5 of the last 7 crises (with losses to market remaining low)
The strategy is based on this research paper by a global asset management firm.
This strategy relies on the theory that certain factors (aka sections of the market) do better than others, or the market as a whole, during crises. It also relies on predicting the start of a bear market correctly, two strong assumptions.