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%.
Fund
625.57%
vs
Benchmark
183.09%
Fund Holdings
The crisis allocation from the bottom of the COVID pandemic was exited after its 2 year investment period. Because the crisis signal was below 6.5% at the time of reallocation, the fund was rebalanced into the market.
Fund details
Stats
3.95/5
Risk score
Max draw down (of range)
Daily Sharpe (of range)
Daily Volatility (of range)
Monthly Volatility (of range)
34.00%
Correlation to S&P (total)
Description
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.