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1 Mar 2016

QLAB Invest - Update February 2016

Absolute-Return Strategy Performance as of 11 February 2016

RISK (10Y)
QLAB Asset Allocation
QLAB Dynamic Allocation
Naive Market Portfolio [1] 1.36% -0.61% -6.73% -1.60% -0.70% 4.43% 8.87% -26.37%

RETURNS: Annualised if >1Y   |   RISK: Annualised standard deviation or volatility, daily data   |   MDD: Maximum drawdown, peak to trough
Strategy indices live 1-Jan-2011, see 
www.qlabi.com for more details or QLAB <GO> on Bloomberg
Indices calculated net of trading costs, gross of product fees. Investable products may have lower returns and shorter track records
[1] A buy-and-hold performance reference, comprising 25% US equities, 25% Commodities, 20% FX, 30% US Fixed Income

Download the latest QLAB white paper here > QLAB_InvestingWithTheEnemy.pdf


Global equity markets remained volatile in February ending the month flat or down. Year-to-date and over 1 year all major equity markets still show large losses. Commodities have not done any better, with the exception of Gold which has rallied recently, but only over the last 2 months. US Government bonds however continue to perform well acting as a safe haven during this period of extended uncertainty.

As a result, the QLAB strategies remain defensively positioned in US Treasury bonds (2YR and 5YR) and have therefore preserved capital for investors. Importantly, whilst there is such high volatility around, the volatility of the QLAB strategies has not increased, actually it has decreased due to the defensive positioning. This gives investors the peace of mind to stay invested and avoid any emotional override of their long term investment plans.

Correlation of the strategies to equities has also dropped dramatically, now standing at 0.1 over a 12 month rolling basis, having fallen from 0.6 half a year ago when equities were performing better and the strategies had equity exposure.

This de-risking and lowering of correlation during a crisis is the result of the systematic investment process which does not rely on economic forecasting but rather reacts to current market conditions. Not being constrained by an asset allocation benchmark and with the ability to avoid falling assets not only allows for preservation of capital in a crisis but also provides strong diversification to buy-and-hold strategies.

The topic of investor emotions and how to manage risk more effectively versus a buy-and-hold approach is covered in a QLAB white paper which you can find here > QLAB_InvestingWithTheEnemy.pdf

This paper was published recently in a book on next generation finance and was also presented during two talks at the Richmond PIMS Forum in Switzerland in October 2015.

The white paper was also picked up by Roberto Plaja on his blog which we highly recommend reading here > www.theboxisthereforareason.com/2016/02/25/the-hardwiring-problem


The portfolios remain defensively positioned going in to March and the only change we expect in the short term is some currency exposure as one or two currencies are now strengthening versus USD. When stronger momentum appears in US equities or Commodities the strategies will re-risk automatically. It is impossible to predict when this will happen which is why an evidence based indicator such as momentum is such a useful investment style to have as part of any portfolio.

QLAB can build a custom strategy for your institution. These strategies use exactly the same investment models as our live strategies but the models are applied to the investment universe defined by the institution with a corresponding set of investment constraints. These may be set to position the strategies alongside other offerings on the product shelf, or comply with regulations such as UCITS. The resulting strategies add convexity to client portfolios through lower drawdown risk than comparable benchmark investing with strong outperformance across an investment cycle, and are delivered via a simple and low-cost license agreement.

Visit www.qlabi.com or Email us at info@qlabi.com for more information


QLAB Asset Allocation and QLAB Dynamic Allocation are accessible in two formats via our product partners:
  • RPM Risk and Portfolio Management (www.rpm.se) manage two Luxembourg funds: QLAB Convexity Fund and QLAB Convexity DL Fund  available to professional investors
  • Neue Helvetische Bank (www.nhbpro.ch) manage two listed certificates traded on the SIX stock exchange available to Swiss domiciled retail and professional investors

Close disclaimer

DISCLAIMER: This document does not constitute an offer, a solicitation, an advice or a recommendation to purchase or sell any investment products associated with the material described herein. The purpose of this document is to describe the principles, research and ideas behind the QLAB Invest strategy indices. Prior to an investment in any product tracking a strategy index, you should make your own appraisal of the investment risks as well as from a legal, tax and accounting perspective, without relying exclusively on the information provided by QLAB Invest. Investment products tracking the indices must be issued or/and marketed by a regulated company. This document is strictly for informative purpose. The single source of the underlying asset data is Thomson Reuters Datastream and QLAB Invest cannot guarantee the correctness of the underlying asset data and cannot be held legally responsible in this regard. Any references made to historical performance up to the official live inception do not reflect actual live performance and can be subject to selection, curve fitting and other statistical biases. Performance in investment products linked to the indices may be reduced by the effect of commissions, fees or other charges in excess of those already factored into the index calculations. The level of the indices will fluctuate due to the volatility of the underlying exposures and past performance or volatility is not necessarily indicative of future results.