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HFEA February 2022 strategy report

February was not a very good month for the HFEA strategy. We lost a significant amount of money and the reason is that TMF (a bond leveraged ETF) didn’t participate in the market as a hedge. Basically, investors were selling everything across the board. Stocks and bonds lost money.

Originally, I dedicated $15,000 for this strategy. That represented approx. 15% of our portfolio. If the strategy underperforms and is below this amount, I will add cash to it. If it outperforms and ends above this threshold, I will trim the position and save the cash aside. We will be rebalancing quarterly and our next rebalancing will occur at the end of March 2022.

The HFEA strategy is about investing in leveraged ETF but adding protection to the downside since the leverage works both ways. I like the idea because drawdowns can be significant.
 

Initial HFEA allocation

 
Start date: 11/27/21
Approach: Variable allocation* – 45%/55% SPXL/TMF
Rebalancing frequency: Quarterly*
Return (total / YTD): -24.15%/-24.15%
Initial contribution: 15% of portfolio Net-Liq (~ $15k)
 

* Variable allocation will be adjusted based on the moving averages and VIX term structure. When moving averages turn negative (downside) and VIX turns into backwardation, the SPXL allocation will be decreased and TMF allocation increased.

 

Current HFEA allocation

 
Approach: 45% SPXL, 55% TMF
 

MONTH NET-LIQ PROFIT/
LOSS
PROFIT/
LOSS %%
November 2021 $13,441.91 $0.00 0.00%
December 2021 $14,773.72 $1,331.81 9.91%
January 2022 $12,597.96 -$2,175.76 -14.73%
February 2022 $11,665.69 -$932.27 -7.40%

 

Our HFEA strategy lost -7.40% in February 2022 while the entire market lost -4.69%.
 

HFEA charts

 
HFEA net-liq 02
Strategy Net liquidation value
 

HFEA vs SPY net-liq 02
Strategy vs SPY Net liquidation value
 

HFEA vs SPY
Strategy performance vs. SPY
 

March has not started on a good note so far. Let’s see how this month ends. At the end of this month we will rebalance our HFEA positions.
 
 





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