A Great Year To Test Alternative Strategies

rogernusbaum

The stock market has gone on a wild ride this year and while we all have our own conclusions about what should happen next, no one actually knows. One byproduct of the huge decline followed by a monster rally on on the way to up a little (as of now) is that if you incorporate funds that use alternative strategies, the funds you've chosen have gone through a good test as to whether or not they meet the expectations they set or your expectations for the fund and hopefully both sets of expectations are the same. I use alternatives to try to manage the portfolio's volatility. This means that I either want an alternative to zig when the stock market zags or I want it to offer a smoother ride to a similar result. It's that second one we are going to revisit today looking at the Standpoint Multi-Asset Fund which can be bought as BLNDX or REMIX. I own shares of the fund for clients and personally.

The fund targets a 50/50 mix between equities and managed futures (managed futures is a trend following strategy using futures tracking commodities, currencies and a couple of other things). Managed futures is probably the best strategy there is for reducing volatility while giving up very little return (Google it) but it can lag equities for years at a time, it can be a difficult strategy to hold for the long term even though the back tests blending equities and managed futures together seems to always be very strong (Google it) which is why BLNDX/REMIX is structured the way it is.

The Standpoint team reached out to me late last year and I was immediately interested in what they were doing. They are headquartered a couple of hours south in Phoenix. I've had a fair bit of interaction with them and met with them in person one time. I have no affiliation though, I am just a customer.

Below is a YTD chart which coincides with it's inception give or take a couple of days. In the manner of how I speak, the objective is a smoother ride to a similar result over the long term. Arguably we've had a long term in the first nine months of 2020 and the fund has met the expectation I feel Standpoint set as well as what I'd hoped it would do.

I don't understand how the market has gone up so much in the last five months. We're going along for the ride, but I don't get it. I can't make an argument for the good times to continue for many years still but they could and if that happens then a fund with only 50% to equities is probably not going to keep up but in terms of thinking about full cycles, regardless of how long that takes, I think the fund has a very good chance of smoothing out the ride. If you want to learn more this link will take you to search results for a bunch of podcasts featuring fund manager Eric Crittenden.