FAST FIVE: One Month. 20 Years. Same Story
Without knowing how long COVID-19 volatility might last, our idea was to mechanically buy “peak fear” days and average into a position that had a historically good chance (based on the 08-09 experience) of showing a gain in 1 years' time.
The average of those days is 2,503 on the S&P 500, 1.1% above today's close but 1.9% below where the index traded most of the day.
Takeaway: we're basically at breakeven on this strategy right now, which is far better than the 2008 experience when it took 9 months to get to flat.
There's a good reason for that: you can pay an active manager 1-2% when presumed structural returns are 18% in the hopes of making 25-30%.
Lower structural public equity returns encourage institutional asset owners to reallocate capital to alternative investments like private equity and venture capital.