Reflections from QuantStreet

April 7, 2022 —

We’re pleased to share our first QuantStreet Capital (QSC) newsletter. As many of you know, we launched QSC in late November of 2021 to help our clients build and preserve multi-generational wealth. To read more about why we started QSC, click here for our story.

At QSC, we benchmark our returns against the MSCI All Country World Index (ACWI). Our goal is to determine a portfolio risk target based on current market conditions and then maximize returns at that level of risk. With our first four months now under our belt, we can take a moment to reflect on the performance of the strategy.

Markets have been tumultuous over the last few months. The new year started with much investor consternation about inflation and how the Fed will remove accommodation without pushing the economy into a recession. The tragedy in Ukraine brought armed conflict to Europe on a scale not seen since World War II. Already rampant inflation fears became yet more pronounced as oil and commodity prices spiked on the back of Russian sanctions.

The Fed is being forced to act more quickly and more decisively than even the most hawkish Fed watchers had anticipated only a few months ago. Treasury yields have increased, and the yield curve has inverted in places. (For example, two-year yields became higher that ten-year yields, at least for a short while; historically, an inverted yield curve has been a good predictor of upcoming recessions). Overall, it’s been a difficult few months.

Fortunately, the QSC portfolio has done well relative to our benchmark (see table below). Our Dynamic Risk Targeting approach has enabled us to effectively manage risks, while allowing the portfolio to reflect the expected return estimates generated by our forecasting models. Since launch, we have outperformed our ACWI benchmark by 2.43%, after accounting for our annual management fee of 0.7%. The realized risk of our portfolio has been in line with, and even slightly less than, the realized risk of the ACWI index.

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We continue to work hard on building up our analytics and on using our many years of market experience to effectively manage our clients’ investments. We thank you for the trust you’ve placed in us. To learn more about the values guiding our decisions, click here.

Past performance is not a guarantee of future results.

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