All blog content is for information purposes. Any reference to indivisual stocks, indexes, or other securities as well as all graphs and tables are not recommendation but only referenced for illustration purposes.

The following is to provide some insight and perspective on the performance of the Audacity Strategy for March and more. For more information on the strategy, visit our website here.

The Audacity Strategy is most often recommended as only one component of a Super-Diversified Portfolio. Therefore the information in this blog only pertains to one component of a Super-Diversified portfolio. For more on Super-Diversification, visit our website here.

Performance Summary

Audacity Strategy performance

* Estimate based on Patton Funds calculations.

Note: the Year-to-Date return is back-tested through 3/31/2020

Audacity closed September up +0.9% in spite of the S&P 500 delivering its worst month since March down -3.8%. This serves as yet another example of how the performance of Audacity is very much independent of the market’s direction. The accompanying graph showing September’s day-by-day performance further highlights the same. As you can see, both Audacity and S&P 500 declined sharply early in the month. Later in the month Audacity staged a stronger recovery than the S&P was able to generate.

Audacity and S&P500 September 2020

Year-to-Date Performance

Year-to-date Audacity is up +5.1% and the S&P 500 has gained +5.6%. A more applicable benchmark though for Audacity is an index of long/short U.S. equity hedge funds, the industry category assigned to Audacity, called the HFRX Equity Hedge Index. This index is down -3.3% year-to-date.

The below graph shows the year-to-date performance of Audacity compared to both the hedge fund index and a variety of equity-oriented asset classes all with a similar risk profile as Audacity. Audacity and S&P 500 are the only asset among this group that are higher while all others are down, a few down somewhat meaningfully, for the year.

Audacity and equity oriented assets year-to-date performance

Portfolio Composition

As I discussed in a separate blog, September was the first month in a dozen when value stocks outperformed growth stocks. This performance behavior generally put downward pressure on the performance of our Audacity Strategy given the style, assigned by Standard & Poor’s, of our existing long and short positions. For example, as the below table shows, of the long positions, those that we want to go up in price, 25 are growth stocks (poorer performing style in September) while only 7 are value stocks (better performing style in September). The opposite is true for our short positions which put similar downward pressure on our overall performance. In spite of this headwind, Audacity gained for the month.

Holding style

[click here to view a full list of holdings and their style]

The composition of the holdings changes regularly, of course, with stocks being traded on nearly a daily basis resulting in overall style changes. That said, the overall changes tend not to be swift but evolve over weeks and months when various trends change in the markets.

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