CIO’s quick comment: passive takes the back seat

stocks pc - Unsplash stock image edited

Just as explained in a previous post, markets are already behaving as if Trump never existed.
The likely side-effect will be sideways markets, given a massive rotation from FANG et co to other sectors and companies.

But BEWARE: only the headline numbers will be giving the impression of a sideways movement ; there will be a volatile storm brewing underneath as liquidity will be shifted across sectors and individual stocks.
This again becomes a quest for alpha, as passive beta strategies seem to be taking the backseat.

Dimitrios NOUSIAS, CFA

CIO

Whitetip Investments AEPEY

TASIS: An Absolute Beta Strategy

TASIS – Whitetip’s proprietary, in-house developed, investment management methodology – is passing the litmus test of market adversity and provides great hope for the future.

At the start of yesterday’s dismal trading session, our portfolios were already 90% in cash and still stand ready to go 100% liquid if the correction continues, thus maintaining their firepower for any rebound, plus having the ability to go outright short in order to benefit from a protracted bearish period.

The accelerated liquidation started 3+ days ago, in tandem with the market, with absolute discipline and devoid of panic & head-scratching.

The account values ended-up e x a c t l y where TASIS’ risk control was projecting and this allows for the two following statements:

  1. We can invest stress-free, because
  2. we keep portfolio risk under control. 

This is huge; Not only for the self-explanatory merits of the above statements, but also because it depicts exactly how TASIS is supposed to work.

In the short term, TASIS offers returns that are correlated to the market, offering passive–like performance; TASIS rises and falls with the market’s ebbs and flows. Sideways markets lead to sideways performance; no miracles there.

However, over the long term TASIS offers uncorrelated, absolute performance which is an absolutely miraculous goal for any portfolio manager.

The way that TASIS achieves this is by accumulating “positive-beta” and disposing-off the “negative” one. This leads to the concept of “Absolute-Beta”.

Here’s how it goes:

Given the tight risk control of TASIS, losses are not allowed to rise and positions are accumulated with a worst-case scenario in mind. 

This means that in a serious correction positions are liquidated on-time, thus leading to favorable relative performance over the short- to medium-term. Should the correction lead to an outright bearish market, TASIS stands ready to benefit out of it, leading to seriously favorable absolute performance over the long-term. Should there be a quick rebound, experience has proven that TASIS can quickly follow the market’s short-term positive performance in a matter of days-to-weeks, even if starting 100% in cash.

Experience has also shown that a couple of weeks-to-months of favorable market performance is enough to produce handsome gains which will be sacrificed to some extend in the first correction, but will lock-in a sufficient amount of profits to serve as a higher stepping stone in the future.

This (should) lead to an “absolute-beta” effect, the equivalent of the Holy Grail in investing.

To re-iterate:

  • We don’t attempt to time the market, or individual stocks.
  • We don’t micro-manage individual positions.
  • We strive to produce returns by managing risks, not by managing positions.
  • We believe that a disciplined systematic approach is the only way towards achieving a robust & reproducible long-term success (skill vs. luck).
  • We believe that positions are mere statistical properties of the global portfolio, not the culmination of our life-long convictions, biases & preferences (a bit extreme of a statement, but we like the poetry in it…)

There’s not one single way to be successful in investing, but each investor can be successful in only one way; Having a crystal-clear view of its investment approach sets any company apart from 90% of its competition to begin with. We at Whitetip strive to position ourselves in this group.

Dimitrios NOUSIAS, CFA

CIO

Whitetip Investments AEPEY

The fallacy of the unprecedented and how to navigate it

Show me someone using the term “unprecedented” with regards to market situation and I’ll show you a person with either little market experience, or no clue, or both. The evolution of market dynamics is a continuous series of unprecedented events and anyone not realizing, or accepting this fact is doing a disservice to herself and her clients.

So, the question boils down to how going about navigating a series of unprecedented events with any chance of success; It all about having a Strategy which prescribes actions so thoroughly that you never have to make a decision in following it in the first place. From this arises the second necessary condition for decision making under (constant) uncertainty, which is Discipline in following the laid-out strategy.

Current discussion about market evolution assigns almost a 50-50 chance on either direction. Making a directional bet based on some form of “analysis” is akin to a coin toss, given all the extraneous parameters over which no-one has a grasp on.

Luckily, at Whitetip Investments AEPEY we’re as stress-free as ever. Our course of action is dictated by TASIS, our proprietary, in-house developed investment management system that rewards assets for trend and penalizes them for volatility and with its robust risk management overlay provides an integrated approach throughout the entire investment cycle. Thanks to TASIS, our portfolios were quiet passive throughout last summer to early fall, went outright long late October, but started trimming positions by the end of February. By the end of the first week of March they were almost completely liquidated and by the next they were outright short. All this happened naturally, just by following the flow of our system’s dictates.

So how do our portfolios look currently? As said, it’s a 50-50 outlook so they’re positioned accordingly with an almost equal split among long & short positions. The global economy is at a junction point in which some industries will pan out as winners and some as losers. A long-short approach is a natural choice in such a situation. Do we expect (or even demand) that every position is going to be a winner? Certainly not. But, instead of promoting convictions based on a self-induced dogma, we let price action be the final jury, which in the process forces us to follow the simple (to the point of truism), but yet so powerful maxim: Cut the losses short and let the profits run, till the trend becomes your friend…

Happy investing everyone!

Dimitrios NOUSIAS, CFA

CIO

Whitetip Investments AEPEY

FFG announced Euro Noteholders meeting results

Follii Follie Group (“FFG”) officially announced the results of the adjourned Euro Noteholders meeting and approval of the Restructuring Term-Sheet by an Extraordinary Resolution held on March 20, 2020 by a crashing 99,89% of votes.
Whitetip Investments AEPEY
has acted as the sole Financial Advisor to FFG.
 
Read the official announcement here.

Consent Solicitation Announcement by Folli Follie Group

Whitetip Investments AEPEY’s Corporate Team is pleased to release the Consent Solicitation Announcemnet by Folli Follie Group (“FF Group”) which marks the beginning of the firm’s Financial Restructuring.
 
Whitetip has been the sole financial advisor to the FF Group.
 
After months of discussions the Board of Directors of FF Group along with its subsidiaries, announces the Launch of Consent Solicitation (Consent Solicitation Memorandum) in respect of a total of approximately EUR 390,000,000‬.
 
A copy of this announcement has been published on the Issuer’s website here.

Whitetip serves as exclusive financial advisor to Folli Follie Group

Whitetip Investments AEPEY serves as exclusive financial advisor to Folli Follie Group (“FFG”) for the restructuring of total value EURO 436m unsecured creditors claims. FFG announced on November 26th that it reached an agreement in principle on the financial terms for its financial restructuring. FFG is a global retailer of clothes, cosmetics and jewellery, with presence in over 30 countries.
Whitetip Investments AEPEY delivered a creative solution and demonstrated unparalleled capabilities in understanding creditors’ and company’s objectives.