The Prometheus S&P 500 Program aims to outperform the S&P 500 over a full investment cycle. The program will strive to achieve this objective by leveraging a combination of Sector Selection, Beta Timing, Active Overlays, and Dynamic Risk Control. Our S&P 500 Program can be integrated with our Crisis Protection Program, which seeks to offer a portfolio diversifier during periods of economic and financial instability by blending active, long-only exposure to Gold, TIPS, and VIX.
For context, we visualize the live returns for our Integrated Program below:
Our programs are operating in line with their long-term expectations. To today’s note, which we will publish in “positions-only” format.
Today, the S&P 500 Program is positioned as follows:
There are four major takeaways from these positions:
Beta Timing: Our beta timing measures continue to show downward pressure on equity indexes coming from locally expensive equities, which are in a downtrend.
Sector Selection: Macro markets are experiencing a sustained inflation shock, which will change the distribution of sector returns. Within the cross-section of equity sectors, our signals have moved to favour energy and builders. This signal is in its early days and does run a modest risk of reversal.
Risk Control: Our risk control continues to guide us effectively in managing drawdowns. In a multi-standard deviation event across all our positions, our expected drawdown is 8%.
Bond Overlay: While we face an ongoing inflation shock in market pricing, fundamental conditions are beginning to align more with a weakening growth backdrop. This weakness of growth, coupled with a modestly positive yield curve, makes treasuries and amenable exposure within a portfolio. This positioning is primarily about carry and diversification during a growth slowdown, rather than an outright alpha view.
These portfolio levers, in aggregate, create an allocation mix with a modest sector-selection bias towards rising inflation and a macro bias towards falling growth.
To this allocation, we add our Crisis Protection Program.
