HEDGEFUNDIE strategy in Europe

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Topic Author
tradri
Posts: 606
Joined: Tue Mar 23, 2021 5:42 pm

HEDGEFUNDIE strategy in Europe

Post by tradri »

Are there any Europeans here following the HEDGEFUNDIE strategy?

I think the WisdomTree ETPs 3x S&P 500 and 3x US Treasuries 10Y would be a good way to accomplish something similar.

I would be curious if there are any other considerations one should take into account.
comeinvest
Posts: 2669
Joined: Mon Mar 12, 2012 6:57 pm

Re: HEDGEFUNDIE strategy in Europe

Post by comeinvest »

I think you mean 3USL and 3TYL.

Possibly cheaper (please verify, I have not verified yet) than the U.S. products: viewtopic.php?p=4696679#p4696679

But 10 year government bonds seems a bit short to me.

Also consider using futures instead. You can construct a global HFEA portfolio using futures.
Topic Author
tradri
Posts: 606
Joined: Tue Mar 23, 2021 5:42 pm

Re: HEDGEFUNDIE strategy in Europe

Post by tradri »

comeinvest wrote: Sun Apr 18, 2021 7:28 pm I think you mean 3USL and 3TYL.

Possibly cheaper (please verify, I have not verified yet) than the U.S. products: viewtopic.php?p=4696679#p4696679

But 10 year government bonds seems a bit short to me.

Also consider using futures instead. You can construct a global HFEA portfolio using futures.
Yes, I mean those ETPs.

They seem to track the underlying index a bit "rougher around the edges" than UPRO/TMF, but the general direction should be very similar.

In the Simba backtesting spreadsheet, one can see that 3x LTT and 3x ITT have produced more or less the same results over the long-term. (This is because ITT looses less due to volatility decay than LTT) It depends on the start/end date, but sometimes HFEA with 3x LTT wins, and sometimes HFEA with 3x ITT wins, so it shouldn't matter all that much in my opinion.

How would you replicate the strategy using futures? Where can I find those? And isn't it more risky due to margin calls?
comeinvest
Posts: 2669
Joined: Mon Mar 12, 2012 6:57 pm

Re: HEDGEFUNDIE strategy in Europe

Post by comeinvest »

tradri wrote: Sun Apr 18, 2021 7:56 pm
comeinvest wrote: Sun Apr 18, 2021 7:28 pm I think you mean 3USL and 3TYL.

Possibly cheaper (please verify, I have not verified yet) than the U.S. products: viewtopic.php?p=4696679#p4696679

But 10 year government bonds seems a bit short to me.

Also consider using futures instead. You can construct a global HFEA portfolio using futures.
Yes, I mean those ETPs.

They seem to track the underlying index a bit "rougher around the edges" than UPRO/TMF, but the general direction should be very similar.

In the Simba backtesting spreadsheet, one can see that 3x LTT and 3x ITT have produced more or less the same results over the long-term. (This is because ITT looses less due to volatility decay than LTT) It depends on the start/end date, but sometimes HFEA with 3x LTT wins, and sometimes HFEA with 3x ITT wins, so it shouldn't matter all that much in my opinion.

How would you replicate the strategy using futures? Where can I find those? And isn't it more risky due to margin calls?
If what you say is correct, then I would infer that LTTs would be better than ITTs if implemented differently than with LETFs. But this is a very difficult subject. I suggest read all the existing threads on treasuries on Bogleheads. (I haven't gotten around doing this yet.) I personally use UB futures more from a gut feeling, as I think it's better to have a larger spread to short term rates, and there is also a fantasy that LTTs eventually some time in my life approach the current level of international government bonds, which would mean I would hit the jackpot. However, I cannot rationally justify using LTTs, as you could argue getting the same effect with a higher allocation to ITTs. I have not yet found a paper or study that would give me a conclusive answer for the LTT vs ITT decision.

Regarding futures, I would also recommend reading all the existing threads on Bogleheads on leverage using futures, before you ask everything again. The short answer is, if you manage your risk, you can avoid any problem regardless which method of leverage you use. I personally use STOXX Europe 600 futures, among others.
Laurizas
Posts: 515
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: HEDGEFUNDIE strategy in Europe

Post by Laurizas »

Topic Author
tradri
Posts: 606
Joined: Tue Mar 23, 2021 5:42 pm

Re: HEDGEFUNDIE strategy in Europe

Post by tradri »

comeinvest wrote: Mon Apr 19, 2021 2:06 am
If what you say is correct, then I would infer that LTTs would be better than ITTs if implemented differently than with LETFs. But this is a very difficult subject. I suggest read all the existing threads on treasuries on Bogleheads. (I haven't gotten around doing this yet.) I personally use UB futures more from a gut feeling, as I think it's better to have a larger spread to short term rates, and there is also a fantasy that LTTs eventually some time in my life approach the current level of international government bonds, which would mean I would hit the jackpot. However, I cannot rationally justify using LTTs, as you could argue getting the same effect with a higher allocation to ITTs. I have not yet found a paper or study that would give me a conclusive answer for the LTT vs ITT decision.

Regarding futures, I would also recommend reading all the existing threads on Bogleheads on leverage using futures, before you ask everything again. The short answer is, if you manage your risk, you can avoid any problem regardless which method of leverage you use. I personally use STOXX Europe 600 futures, among others.
Yes, if you don't have to worry about the volatility decay, LTTs are probably better, since they have a higher return.

Could you link me to some posts that outline how one could implement such a strategy with futures? (Although I'll most likely stick to LETFs due to the simplicity.)

Is there also a future on the S&P 500 available in Europe? So far I couldn't find one.
Topic Author
tradri
Posts: 606
Joined: Tue Mar 23, 2021 5:42 pm

Re: HEDGEFUNDIE strategy in Europe

Post by tradri »

Laurizas wrote: Mon Apr 19, 2021 5:06 am viewtopic.php?f=22&t=333893
Thank you.
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