How do you count HFEA as part of your AA?
How do you count HFEA as part of your AA?
I have money in Vanguard Roth IRA that I will not be able to implement HFEA in (since they don't allow leveraged funds). It's in a domestic/international (63/37%) allocation, with a SCV tilt. I know Hedgefundie said that an international/SCV tilt WITHIN HFEA is difficult because of increased volatility, which is fine, but my question is about inclusion of HFEA as part of your overall AA.
I have HFEA in equal parts in another non-Vanguard Roth and my taxable (55 UPRO/45 TMF) - but I know most people aren't 100% in HFEA, and only gamble with a portion of their portfolio.
How do you count HFEA when considering domestic/international/bond allocation? Do people accordingly overweight international in their non-HFEA portfolio to account for this domestic bias (holdings of HFEA)? Or do you have the same domestic/international allocation even w/ HFEA?
Similarly with bonds - underweight bond allocation because of bonds in HFEA? Or same AA here?
I have HFEA in equal parts in another non-Vanguard Roth and my taxable (55 UPRO/45 TMF) - but I know most people aren't 100% in HFEA, and only gamble with a portion of their portfolio.
How do you count HFEA when considering domestic/international/bond allocation? Do people accordingly overweight international in their non-HFEA portfolio to account for this domestic bias (holdings of HFEA)? Or do you have the same domestic/international allocation even w/ HFEA?
Similarly with bonds - underweight bond allocation because of bonds in HFEA? Or same AA here?
Re: Do you count HFEA as part of your AA?
Yes, two ways. First, I have 50-25-25 of IXUS, UPRO, TMF. So my international exposure is not through a leverage fund but works out to Vanguards 60-40 US - International split.
1) as part of my 90/10 allocation, in which case its 100% equities.
2) as what the exposure truly is 125/75, or ~74/36 at 2x leverage.
My overall portfolio is either 90/10 using the first method, or 75/25 at ~1.2x leverage using the second.
I wonder how many here believe 75/25 at 1.2x leverage is riskier than 100% equities or even 90/10.
1) as part of my 90/10 allocation, in which case its 100% equities.
2) as what the exposure truly is 125/75, or ~74/36 at 2x leverage.
My overall portfolio is either 90/10 using the first method, or 75/25 at ~1.2x leverage using the second.
I wonder how many here believe 75/25 at 1.2x leverage is riskier than 100% equities or even 90/10.
Last edited by bgf on Wed Jan 26, 2022 5:01 pm, edited 1 time in total.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Re: Do you count HFEA as part of your AA?
Hm... so do you normally count it as 1) or 2)? Seems a little weird to count the TMF part of HFEA as "equities" in this instance, but I think I might be completely misunderstanding your point.bgf wrote: ↑Wed Jan 26, 2022 4:42 pm Yes, two ways. First, I have 50-25-25 of IXUS, UPRO, TMF. So my international exposure is not through a leverage fund but works out to Vanguards 60-40 US - International split.
1) as part of my 90/10 allocation, in which case its 100% equities.
2) as what the exposure truly is 125/75, or ~74/36 at 2x leverage.
My overall portfolio is either 90/10 using the first method, or 75/25 at ~1.2x leverage using the second.
I wonder how many hear believe 75/25 at 1.2x leverage is riskier than 100% equities or even 90/10.
Re: Do you count HFEA as part of your AA?
You're correct, and I agree with you. I think that 1) is an oversimplification. It basically assumes that HFEA is benchmarked to outperform your equity allocation, so to simplify things you allocate as 100% equities. Again though, this is an oversimplification.OhpBuddy wrote: ↑Wed Jan 26, 2022 4:57 pmHm... so do you normally count it as 1) or 2)? Seems a little weird to count the TMF part of HFEA as "equities" in this instance, but I think I might be completely misunderstanding your point.bgf wrote: ↑Wed Jan 26, 2022 4:42 pm Yes, two ways. First, I have 50-25-25 of IXUS, UPRO, TMF. So my international exposure is not through a leverage fund but works out to Vanguards 60-40 US - International split.
1) as part of my 90/10 allocation, in which case its 100% equities.
2) as what the exposure truly is 125/75, or ~74/36 at 2x leverage.
My overall portfolio is either 90/10 using the first method, or 75/25 at ~1.2x leverage using the second.
I wonder how many hear believe 75/25 at 1.2x leverage is riskier than 100% equities or even 90/10.
The second method is accurate but potentially more difficult to apply.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Re: How do you count HFEA as part of your AA?
Any other HFEAers? Am I posting this in the wrong thread? Not sure if all HFEA related things go in the HFEA mega-thread under "Theory."
Re: How do you count HFEA as part of your AA?
What does HFEA stand for?
Human Fertilisation and Embryology Authority- according to GOOGLE.
I struggle to insert that into an Asset Allocation.
Human Fertilisation and Embryology Authority- according to GOOGLE.
I struggle to insert that into an Asset Allocation.
- xraygoggles
- Posts: 308
- Joined: Sat Sep 15, 2018 3:30 pm
- Location: Paradise
Re: How do you count HFEA as part of your AA?
Old thread but the way I allocate HFEA is just the entire portion (upro/tmf) as 5% of my portfolio. I don't separate the allocations in % stock vs % bonds, b/c it doesn't work without both components.
Simplicity is the key to brilliance - Vti & chill.
Re: How do you count HFEA as part of your AA?
HEDGEFUNDIE's Excellent Adventure.
As an early accumulator, I don't really calculate AA. I do however include HFEA along with mortgage for the purposes of calculating my overall portfolio leverage ratio.
-
- Posts: 16054
- Joined: Fri Nov 06, 2020 12:41 pm
Re: How do you count HFEA as part of your AA?
I'm not a HFEAer but I'd just count the whole HFEA portion as equities if I were doing it.
- nisiprius
- Advisory Board
- Posts: 52216
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: How do you count HFEA as part of your AA?
Take the percentage of your total portfolio allocated to HFEA. Call that H.
Since you are using 55 UPRO/45 TMF, and since they are 3X leveraged, take 3xHx55% and count that as your US stock allocation. Take 3xHx45% and count that as your US bond allocation.
So if H were 10%, then you'd count it as 30% x 55% = 16.5% US stocks and 30% x 45% = 13.5% US bonds.
Since they are leveraged, when you add it all up your total portfolio will add up to 120% instead of 100%.
To take a crazy example to make the mental arithmetic clearer, suppose the rest of your portfolio were 90% international stocks.
Then your final answer, for 90% international stocks and 10% HFEA, would be
16.5% US stocks
90% international stocks
13.5% US bonds
Total 120%
Since you are using 55 UPRO/45 TMF, and since they are 3X leveraged, take 3xHx55% and count that as your US stock allocation. Take 3xHx45% and count that as your US bond allocation.
So if H were 10%, then you'd count it as 30% x 55% = 16.5% US stocks and 30% x 45% = 13.5% US bonds.
Since they are leveraged, when you add it all up your total portfolio will add up to 120% instead of 100%.
To take a crazy example to make the mental arithmetic clearer, suppose the rest of your portfolio were 90% international stocks.
Then your final answer, for 90% international stocks and 10% HFEA, would be
16.5% US stocks
90% international stocks
13.5% US bonds
Total 120%
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
- xraygoggles
- Posts: 308
- Joined: Sat Sep 15, 2018 3:30 pm
- Location: Paradise
Re: How do you count HFEA as part of your AA?
Let's say someone had HFEA as 20% of Roth portfolio, and it was 100k total portfolio size, would the leverage ratio of the entire Roth be 20k*3 + 80k / 100k = 1.4x?nisiprius wrote: ↑Tue Apr 05, 2022 12:18 pm Take the percentage of your total portfolio allocated to HFEA. Call that H.
Since you are using 55 UPRO/45 TMF, and since they are 3X leveraged, take 3xHx55% and count that as your US stock allocation. Take 3xHx45% and count that as your US bond allocation.
So if H were 10%, then you'd count it as 30% x 55% = 16.5% US stocks and 30% x 45% = 13.5% US bonds.
Since they are leveraged, when you add it all up your total portfolio will add up to 120% instead of 100%.
To take a crazy example to make the mental arithmetic clearer, suppose the rest of your portfolio were 90% international stocks.
Then your final answer, for 90% international stocks and 10% HFEA, would be
16.5% US stocks
90% international stocks
13.5% US bonds
Total 120%
Simplicity is the key to brilliance - Vti & chill.
Re: How do you count HFEA as part of your AA?
I don't think you should count it and you should set your AA as though it doesn't exist. in 5-10 years later you can reassess. That is assuming HFEA isn't more than 10% of so of your portfolio, it it's bigger to the point where having it go to zero would cause you big concern maybe you should reduce the amount of your assets in HFEA.