Newsletter end of March 2020

For the month of March 2020, the Enhanced Permanent Portfolio account returned net 4.06%.

During the reporting period, we experienced the biggest market crash since 2008, with all equity markets plunging by around -30%. Unlike previous crises, so-called “safe haven” products Treasury and Gold also sold off massively over the period. Volatility exploded across all asset classes.Our futures and options based defensive permanent portfolio strategy which includes safe haven Treasuries and Gold did quite well during the first days of the market crash, giving us time to reduce the stock exposure in time. In a second downturn, Treasuries and Gold also lost quite a lot because investors began to panic sell every liquid asset they had to cover equity losses. An advantage was that we only use very liquid products, most of them traded 23 hours day, which traded also during the crash with tight spreads. This allowed us to actively manage the portfolio risk in real-time.We have back-tested the strategy during previous big market corrections and expected a move from stock positions into “equity-like” far out of the money leap option positions. These options behave like their underlying Gold, Treasury and SP&500 ETFs, but due to the record high volatility they kept between 12-17% of volatility premium. This premium quickly paid out due to decreasing volatilities and even if the underlying assets are still far away from their previous price levels, the positions managed to recover and even ended the month with a gain.We expect a global recession over the next 6-9 months with corresponding price pressure on the stock markets. The Belalp portfolio is positioned in such a way that we can expect a positive performance even in this scenario.

Your Rational Invest Team
Walter Baumann / Frank Grossmann / Thomas Ritter
Tel +41 44 515 48 00 / Email info@rational-invest.com