THE MODEL PERFORMANCE AND ASSOCIATED TRADES DISCUSSED IN THIS ARTICLE ARE DOCUMENTED IN LIVE SIMULATED TRADING. TRADES ARE SENT IN REALTIME TO THIRD PARTIES AND RECORDED BY AN INDEPENDENT THIRD PARTY. PLEASE READ OUR FULL DISCLAIMER.
- • a continuous and persistent unwinding of long positions in US Treasuries
- • a relentless buying in fixed income assets fuelled by the ECB QE programme
The strength of the model has been in identifying long-term positioning changes in their early stages. The shift in European investors’ positioning was captured and flagged by the model in May (see New Pattern Emerging May) while the strategies entered a short position on October 1 in the 10Y T-Note as the long-bias began a sharp reduction that continued throughout Q4 (see The Constant Long-Bias Decline in US Treasuries Positions).
As underlined in the Mid-Year Performance Update, the AG risk monitoring indices played a vital role particularly in the first quarter of 2020. The strategies benefited from two proprietary risk measures which prevented the model from entering trades when the market environment was inadequate for the strategies: (1) the Volatility Index: constantly measuring the underlying asset’s volatility relative to its recent behaviour; (2) the Dysfunctional Index which determines when the market is ‘dysfunctional’ by systematically monitoring the security’s daily price action.