Uncorrelated to Stocks
The inclusion of Brandywine’s Symphony program in an equity portfolio both increases returns and decreases risk. Before we present the results, because the results presented here include both ACTUAL performance (beginning July 2011) and tested performance, the following hypothetical disclaimer is required:
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Consistent Returns & Non-Correlation to Stocks
Brandywine’s Symphony program produces profits during negative periods for the S&P 500 index. Over the past 22 years the S&P 500 suffered 29 peak-to-trough drawdowns that averaged -7.3%. During those periods, the tested performance for Brandywine’s Symphony program gained an average of +2.3%. The (non-)correlation of Brandywine’s performance to that of the BTOP 50 during those periods was -0.89.
Because Brandywine’s Symphony program profits when the S&P 500 index loses, the inclusion of Brandywine’s Symphony increases returns and decreases volatility and drawdowns. The table and graph below show the improved performance that results from allocating 50% to Brandywine’s Symphony and 50% to the S&P 500.
The Addition of Brandywine’s Symphony Increases Returns and Decreases Risk
| Comparison: S&P 500 Alone & 50% S&P 500, 50% Brandywine | ||
| S&P 500 | 50-50 | |
| Years | 21 1/2 | 21 1/2 |
| Average Annual Return | 8.61% | 10.76% |
| Annualized Volatility | 15.07% | 9.05 | Maximum Drawdown | -44.73% | -17.71 |
| % Profitable Months | 64% | 64% |
| % Profitable Rolling 12-month | 79% | 87% |
| % Profitable Years | 76% | 86% |
Actual Performance: 2011
This tested non-correlation continues today with the actual trading of Brandywine’s Symphony. Since the launch of Brandywine’s Symphony program in July, the S&P 500 index declined as much as 13.9%, while Brandywine’s Symphony program has gained 7.90%. The result is that the 50-50 portfolio is profitable while the S&P 500 shows a loss.
| Comparison: S&P 500 Alone & 50% S&P 500, 50% Brandywine | ||
| S&P 500 | 50-50 | |
| Years | 7/12 | 7/12 |
| Average Annual Return | -1.39% | 7.08% |
| Annualized Volatility | 21.11% | 8.72 | Maximum Drawdown | -13.87% | -4.08 |
| % Profitable Months | 29% | 57% |
| % Profitable Rolling 12-month | N/A | N/A |
| % Profitable Years | N/A | N/A |
Brandywine’s use of fundamentally-based (but systematically-applied) non-correlated strategies results in similar diversification benefits when applied against most investors’ equity portfolios and additionally when applied against other CTAs (see: Uncorrelated to CTAs). Let us know if you’d like us to run a report that shows the benefit of incorporating Brandywine’s Symphony program in your portfolio.