Instead of introducing another high-cost hedge fund product only accessible for the rich, we’ve developed TW_v4_SPY, a scalable strategy designed for all investors and specifically for trading the SPY, a widely recognized benchmark in global markets. As the investment landscape becomes more challenging, this strategy aims to deliver consistent outperformance relative to the SPY through a disciplined and rule-based approach (see performance in the 15+ years ‘LOG’ chart above).
As you can see from the chart, the strategy performs exceptionally well during times of increased volatility, when the general market trend is downward or sideways (green boxes).
For those not familiar with log charts, we add here below the performance chart of the TW_v4_SPY strategy at regular scale. The only problem here is that you can’t compare it well to the performance of the SPY during the same period, the red line at the bottom of the chart.
Why Now?
The traditional buy-and-hold approach to investing, while historically effective, faces headwinds. Below the two main reasons for this thesis:
- Reduced Return Expectations: Following years of outsized equity market gains, future returns for passive SPY investors are likely to normalize toward historical averages, leaving limited opportunities for excess returns. This thesis is also supported by the fact that major market indicators are showing increasing divergences on weekly and monthly time frames.
- Market Volatility: The 2020s have already experienced significant turbulence, including the COVID-19 pandemic (2020-21) and inflationary pressures (2022-23). The future presents additional challenges: a public debt burden at 123% of GDP, which, as highlighted by this brief on debt from Penn Wharton, risks becoming unsustainable sooner than later; an uncertain labor market with AI already displacing tons of jobs in tech; and the mounting financial strain of global warming. Historically, markets endured a ‘lost decade’ from 2000 to 2010, underscoring the potential for prolonged instability.
TW_v4_SPY was launched to address these dynamics, offering a robust approach to trading the SPY that seeks to capitalize on market inefficiencies while managing downside risk.
Performance Highlights
- Consistent Outperformance: TW_v4_SPY has achieved cumulative gains significantly higher than SPY, with better protection during periods of drawdown.
- Risk-Adjusted Returns: The strategy is designed to manage risk effectively, resulting in higher Sharpe and Sortino ratios and lower maximum drawdown compared to passive SPY investing.
- Track Record: The strategy’s 15-year annualized return of 46.31% versus SPY’s 12.58% underscores its ability to generate excess returns over time while actively managing risk.
These results reflect TW_v4_SPY’s adaptability and precision in navigating various market conditions.
Key Features of TW_v4_SPY
- Capacity: Trading the SPY Directly
TW_v4_SPY focuses exclusively on trading the SPY, leveraging its liquidity to enhance execution efficiency and increase the strategy’s capacity. As both the traded asset and benchmark, SPY provides a clear and transparent measure of performance. - Maximizing Gains During Volatility
TW_v4_SPY thrives in periods of increased market volatility by seizing opportunities for larger gains during turbulent conditions (see first chart above). This focus makes it an ideal complement to trend-following strategies, which excel in smoother, directional markets. Together, these strategies create a balanced portfolio that performs across diverse market environments. - Focus on Drawdown Management
TW_v4_SPY incorporates disciplined risk management practices, reducing exposure during adverse conditions. This approach helps minimize losses and quick recovery, providing a smoother equity curve and better overall portfolio stability (see chart below). - Long-Term Scalability
Designed for both retail and professional investors, TW_v4_SPY integrates seamlessly into diversified portfolios, offering an effective complement to traditional SPY holdings.
Why TW_v4_SPY?
Investors today demand strategies that go beyond passive investing to actively capture opportunities in the market. TW_v4_SPY was launched with this purpose: to provide a systematic, repeatable, and disciplined way to outperform the SPY.
The strategy’s performance highlights its ability to adapt dynamically, delivering both consistent returns and robust risk management. For investors seeking a smarter way to navigate today’s markets, TW_v4_SPY offers a compelling solution.
Explore how TW_v4_SPY can enhance your portfolio by leveraging the power of systematic trading with the market’s most recognized benchmark.
