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:
- We can invest stress-free, because
- 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
