This post is something of a rarity for me - I want to focus on something of a more technical nature, and I'm going to attach some supporting documents which may (if I am lucky) help. The thing which interests me here is the way in which our chosen investment models tend to work, when compared with alternatives which (initially at least) look feasible, or relevant.
The backstory here is that, in March 2011, I was in the process of investing a dollop of my Transact
pension fund when I had the choice of either
one of our internal ValidPath model portfolios (60/40 Equity/Bond) or 'something else'. In this case, the 'something else' was the Way Hasley Global Momentum Fund
which launched the previous month. What was focusing my mind was the representative from Hasley, and old friend who was doing his best to persuade me that this fund was actually a viable alternative to the more traditional asset-allocation strategies (to which, I will admit, I was fairly firmly wedded in principle).
Now, I'm not a great fan of the idea of experimenting on clients when it comes to new stuff. I generally would not want to go down that route until I had experimented on myself first, as it were. So here was the perfect opportunity! On the 31st March 2011, I invested two sums via my own pension, one into the good old ValidPath 60/40 model, and the other into the brand, spanking new Momentum Fund where, as far as I could see, the predominant risk was that all the techie knowhow simply wouldn't work in practice. I must confess to not being particularly convinced by the new innovation, although it was difficult to gainsay the substantial academic input to the new fund's strategy. I hope that putting my money where my mouth was, was a sign of an open-mind - even though, intellectually, it was difficult to justify the approach I was about to take. In recent years, there has been an endless succession of new fund launches, and new propositions, which simply don't 'fit' any kind of coherent philosophy that one might come up with. My response, invariably, is to ignore them and focus on what I know works.
Two years down the line, how have the two models compared? OK, I accept that in equity markets, two years is almost too short a time on which to make any kind of valid comparison - but I would expect the shorter term to almost favour the Way Global Momentum fund against the more traditional model which is likely to be more directly affected by systemic fluctuation. Over exactly the same time period, to today's date, and net of all charges, here are the returns achieved:
Return from 31/03/2011
Way Global Momentum
If you wish to see the bigger picture for the ValidPath 60/40 model, then here is what it has looked like:
You can download further analysis of the two alternatives from the following links: