Portfolio due diligence

Annualized volatility and maximum drawdown by sleeve, full-history backtest.

The portfolio's maximum drawdown was 17.3% in 2008. The main contributors were short-term tactical (−7.7 percentage points), tactical allocation (−4.0), mean reversion (−2.9) and momentum (−2.6). Across the ten largest drawdowns, short-term tactical and tactical allocation were the most frequent drivers.

Contribution to the portfolio's largest drawdown (-17.3%, 2008), in percentage points.

The portfolio uses VXX and UVXY for long-volatility exposure, alongside systematic equity and ETF shorts. VIX indices are used as signals; the portfolio does not trade VIX futures or options.

In calm years, the median long-volatility cost was approximately 0.3% annually before client fees and 0.9% after allocated client fees. Results vary because the hedge is tactical rather than permanently held.

The worst historical whipsaw was an 11.1% portfolio-contribution loss between May 2012 and August 2015. It was not recovered until September 2020.

The ETI does not run a fixed absolute volatility target. Realized annualized volatility over the full backtest was approximately 11.7%. Weights are determined through:

• Strategic allocations across close, overnight and intraday strategies
• Daily systematic signals
• Relative-volatility scaling
• Portfolio caps, priority rules and beta hedging

The six reporting sleeves are not periodically reoptimized. Their underlying allocations change daily with signals, while strategic budget changes are made through the research and portfolio-review process.

The ETI return series also includes its client fee structure, so its reported performance differs from an individual live account.

Observed gross, net and short exposure as a share of NAV, January 2018 to June 2026 — exposure varies with signals rather than tracking a fixed target.

Configured and observed maximum individual-stock exposure was 20% long and approximately 7.5% short. Those are very rare numbers.

Maximum observed gross exposure by sleeve, as a share of NAV. These are historical maxima, not normal day-to-day allocations.

Stocks are S&P 500 members, point in time.

The ETF set is dynamic rather than a fixed list of 20–25 instruments. The median day contained approximately 13 ETFs. The current economically active set includes:

Smaller or intermittent allocations may also appear in international, factor, commodity, bond and sector ETFs.

February 2018 provides a useful example.

February 2018, phase by phase: index, portfolio, and the crisis-hedge contribution.

Tactical allocation, momentum and real assets were hit first. During the main shock, short-term tactical was the largest loss contributor.

The volatility hedge reacted after the initial decline and reduced subsequent losses, but did not fully offset them. It then gave back part of the protection during the rebound. That sequence is the honest shape of this kind of insurance.

The portfolio uses IBIT for Bitcoin exposure and ETHE for Ether exposure. Maximum combined observed digital-asset exposure, which is also the actual combined limit, is approximately 10% — and again, that level is very rare.

The portfolio is systematic in signal generation, sizing, portfolio construction and target weights. There is no active discretionary strategy override.

Operational intervention remains possible for risk management, execution or exceptional market circumstances, but it is separate from the investment model.