Annual performance update- year 12

 This is how I started last years update: "Mad out there isn't it? Tarrifs on/off/on/partially off/on... USD/SP500/Gold/US10/Bitcoin all yoyoing like crazy."

Well the orange peril is still at it, and as I write this the global supply of oil has been severly curtailed for several weeks now; with a certain amount of reaction in oil futures (which some of it perhaps supressed since apparently "cash on the nail" prices for physical oil are much higher in some delivery ports), but net-net almost none in US stocks. 

As always I do these updates on the basis of the UK tax year, 6th April to 5th April; and as I did last year I'm going to focus almost entirely on my futures trading.

Overall figures 

My total portfolio performance was 6.4%. Almost all of that is down to futures; without it I would have earned just 0.2%. This is not surprise since my long only portfolio has been very low risk, consisting almost entirely of short term bond futures, after I went 100% cash during the taper tantrum (yes, bad move in retrospect, and another failure of discretionary trading on my part). I did start to selectively buy back into equities in the last month or so. Whilst 6.4% is better than nothing, and better than last year, it pales when compared to my Vanguard 80:20 benchmark which was up 23.7% during the tax year. My plan is to refill my equities portfolio over the next couple of years, hopefully using the short term panics which are helpfully generated by the White House every few weeks.

Everything else in this post just relates to futures.

Futures: Headline numbers

Last year in brackets

MTM:        21.9%   (-17.8%)

Interest:    2.7%   (2.4%)

Fees:       -0.04%  (-0.05%)

Commissions:-0.33%  (-0.29%)

Slippage:   -0.55%  (-0.56%)

Net :       23.7%   (-16.3%)

Well first let's note that it is a positive number, and it's also my best performance since 2022 (when another significant conflict started, and I made 27%). Curiosly this is identical to the 80:20 benchmark, at least to one decimal place, but of course that is a silly comparision and a better benchmark is coming later. 

'Interest' includes dividends on 'cash like' short bond ETFs I hold to make a slightly more efficient use of my cash. MTM - mark to market - also includes gains or losses on FX positions held to meet margin, and on the cash like ETFs. MTM breakdown:

Pure futures:    21.7%

Cash like ETFs:  -0.77%

FX:               1.1%

As I did last year then, let's lump together all the interest, FX and ETF MTM and interest, and call those 'cost/benefit of margin':

Futures MTM: 21.7%   (-14.5%)

Fees:        -0.04%  (-0.05%)

Commissions: -0.33%  (-0.29%)

Slippage:    -0.55%  (-0.56%)

SUBTOTAL - PURE FUTURES: 20.7% (-15.3%)

Cost of margin: 2.9% (-1.0%)

Net :       23.7%  (-16.3%)

Time series

You can see that about half the profits were made quite slowly from June to November; and then the other half made very quickly in December and January (we will return to that later). After that things got quite volatile with the whole war thing happening, and risk is currently quite low.

And for the longer term you can see we are pretty much at the HWM set in April 2024, although I never quite got there:

(Note as for all my plots these are non compounded account curves)

Benchmarks

My two traditional benchmarks are the SG CTA index, and an AHL fund which like me is denominated in GBP. A big thanks to Neils from TTU for sharing his SG data as my previous free source stopped working (SG if you are reading this, come on guys, please share!).

First meaningless raw performance:

                AHL       SG           ROB

Mean       5.6%      4.9%         13.8%

Stdev     10.7%      9.0%         17.3%

SR (rf=0)  0.52      0.54          0.80        

Those Sharpes would be lower, especially in the last couple of years, if a risk free rate was deducted.

My correlation is 0.68 with SG CTA, and 0.56 with AHL. Their joint correlation is 0.79.

Now for vol adjusted:

          AHL   SG     Me

30/03/15 68.4% 51.2% 59.5%

30/03/16 -6.4% -3.7% 28.1%

30/03/17 -3.8% -12.6% 2.4%

30/03/18 9.0% -1.7% 2.0%

30/03/19 5.4% -2.7% 4.5%

30/03/20 22.6% 6.5% 33.8%

30/03/21 0.9% 11.9% -1.7%

30/03/22 -12.4% 33.1% 25.8%

30/03/23 8.3% 0.6% -7.6%

30/03/24 14.9% 24.3% 20.6%

30/04/25 -18.7% -18.0% -15.4%

30/04/26 30.3%  29.9%   25.9%

Note: The reason I'm showing 25.9% here and 23.7% earlier, is that these figures are to the end of the relevant month (i.e. March 31st to March 31st), rather than the UK tax year; as I can only get monthly figures for the AHL fund. I've highlighted in green the best performer in each year, red is the worst. 

I've highlighted in green the best performer in each year, red is the worst. A great performance from AHL; their fund was up 18.1% before vol adjustment and as they run at significantly less vol than me this was fantastic. SG CTA also did very well, with raw performance of 15.3%. As a result I was actually the worse of the three for this year at least. 

The CAGR based on monthly vol adjusted figures are 7.7% (AHL), 8.2% (SG) and 13.0% for me.

Market by market

Here is the asset class story:

==================
P&L by asset class
==================

    codes  pandl
    Bond  -2.84
     Vol   0.00
  Sector   0.39
  OilGas   2.21
      FX   2.24
     Ags   3.89
  Metals   5.49
  Equity   5.49

Market wise, the rogues gallery were CAD10 year bonds, plus a few equity markets (SPI200, DOW, DAX) and the US dollar index. I lost between 1% and 1.2% in each of those. The markets where I made more than 1% are quire varied:

          TOPIX    1.0
           PLAT    1.0
            AEX    1.0
        BITCOIN    1.1
            JPY    1.2
       MSCIEAFA    1.7
         YENEUR    2.0
     BRENT-LAST    2.3
            MIB    2.7
     MSCITAIWAN    3.6
        FEEDCOW    4.0
         SILVER    4.2

Silver in particular was quite famous earlier in the year and shows a classic TF curve (price, position, p&l):

Rather overlooked by the legacy media; Feeder Cattle was one of the nicest runs:

Trading rules

Last year almost none of my trading rules made money, all of which contributed to my worst ever year trading futures with my first double digit loss. 

Overall then a much nicer picture for the divergent rules, with convergent less nice except for skew. The best performing model this year at least was the most traditional, the 'momentum' model which is a bunch of moving average crossovers. This probably explains my relative underperformance this year. Also worth nothing that the slowest trend models did the best in almost all categories.

Costs and slippage

My total slippage (diff between mid market price when I come to place an order, and where I get filled) was 0.55% of my starting capital; and commissions were 0.33%. That's an all in cost of 0.88%, very much in line with last year and previous years. Since I switched to dynamic optimisation, my costs have been extremely consistent.

Without my execution algo, if I had just traded at the market, I would have paid 1.34% in slippage; my simple algo earned 78bp and cut my slippage bill by around 40%. 

Coming up

As I noted above I plan to rebuild my long only portfolio out of the smoking ruins of my cash pile over the next couple of years. I also have some interesting things planned in the research and production space this year; you can find more details here.