Snapshot of Weekly Allocation, Performance & Post-mortem (SWAPP): 21 Oct-17


Allocation

Strategic allocations (13.7%):

  • Equity (6.8%):

  • Single-names: Long AAPL, short NFLX

  • Long VIX

  • Basket of EM equity longs: China small caps, Brazil, South Africa

  • Basket of EM equity shorts: India, Egypt, MSCI EM

  • FX (6.9%):

  • Basket of FX longs: EUR-CZK, EUR-HUF, ZAR, MXN, JPY, CHF

  • Basket of FX shorts: EUR-JPY, EUR, GBP, NZD, RUB, CAD

Tactical allocations (69.5%):

  • Equity (18.4%):

  • Basket of EM equity longs: Korea Kospi 200, Argentina, Pakistan, Qatar

  • EM equity shorts: Turkey

  • FX (51.1%):

  • Short EUR-JPY

Other/cash (16.8%):

  • SGD hedge (11.1%)

  • Cash (5.7%)

Performance summary

Week of 21 Oct: xx% (prior week +3.4%):

  • Positive contributions from:

  • Strategic short NZD

  • Strategic long Pakistan

  • Tactical short Ibex (realized Thu, 19 Oct)

  • Tactical long Kospi 200

  • Performance detractors:

  • Strategic long AAPL

  • Strategic long China small caps

  • Strategic short Egypt

  • Strategic long VIX

  • Strategic long Qatar

  • Tactical short EUR-JPY

  • Tactical long Argentina

  • Short SGD-CNH

Post-mortem analysis

Missed opportunities:

  • Short NZD: While we maintained a strategic short kiwi position, our exposure could have been much larger ahead of NZ1’s Peters' decision to form a govt with Labour. We miscalculated the extent that the prospect of such a govt was already well-anticipated by the market.

  • Long VIX: We missed an opportunity to take profit after VIX spiked on the 30th anniversary of Black Monday.

  • Tax trades: Whilst the chance was high for the Senate to pass a 2018 budget resolution, we had no direct exposure to this catalyst. In retrospect, we should have positioned via long SPX futures, short UST futures and re-sized our strategic long USD position.

Rank of Conviction-Correlation model output (Predicted) vs Actual week-on-week returns:

Learnings/what struck me:

  • China ‘Party Congress Put’ trades (short SGD-CNH, long A-shares) did not perform well. The tone of the meeting was not as optimistic. In fact, it was downright ominous. PBOC Governor Zhou's mention of China's "Minsky moment" spooked the market on Thursday, 19 Oct. We will hold on to "Party Congress Put" trades on the presumption that officials may want to end on an optimistic note.

  • Long AAPL vs NFLX: While we were excited about iPhone X sales, the main driver was iPhone 8-related news (reduced shipments). We should have executed our NFLX short after the post-earnings boost.

  • We 'de-risked' the portfolio due to long weekend-travel to HK. And while being away from the home office detracted from performance ... the connections made in HK were invaluable. Thanks everyone who took the time to meet up during my HK visit. Time flies!:

#swapp #nzd #vix #china #aapl #nflx #kospi #eur #jpy

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