In March our HFEA strategy continued underperforming thanks to our position in TMF. The bond fund continued struggling. It became a victim of the FED’s tightening and reducing its bond purchasing program. Bonds tanked. But I decided to change my allocation and increase my position in SPXL when rebalancing the portfolio this month.

Originally, I dedicated $15,000 to 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 June 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): -18.07%/-18.07%
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: 75% SPXL, 25% 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%
March 2022	$12,483.01	$817.32	7.01%

 

Our HFEA strategy gained 7.01% in March 2022 while the entire market gained 4.80%.
 

HFEA charts

 

Strategy Net liquidation value
 

Strategy vs SPY Net liquidation value
 

Strategy performance vs. SPY
 

March has not started well but finished a lot better, outperforming the market. Since I expect the market to resume its uptrend, I rebalanced the portfolio increasing allocation toward the bullish SPXL fund. Since the strategy outperformed the goal and target allocation, I added more funds in March (deposited an additional $3,774.84) to bring the account up to the allocation target and rebalanced the account to the 25%/75% (SPXL/TMF) target.