Stronghold EUR: up 0.6% in January and 2019 update

Since inception in July 2017 the Stronghold EUR portfolio has delivered 3.5% annualized return which is lower than the returns we observe in the backtest but these returns are for many reasons an upper limit for what to expect in the future. The annualized volatility has been 4.5% which is a bit lower than what we observe in the backtest. Combining the two metrics the annualized Sharpe ratio (assuming 0% risk-free return) is realized 0.8 and our outperformance over the benchmark (which is calibrated to have the same risk profile as our target) is 0.9% annualized.

Stronghold EUR increased equity exposure in early January but has since scaled it somewhat back but with an equity exposure of 32.3% the portfolio still has a historically high level of equities. That means that the portfolio will benefit from improvements in economic activity and the coronavirus only being a temporary event with minor economic impact for China and the global economy. Obviously the key risks are the coronavirus, weaker USD (due to its USD exposure via minimum volatility stocks) and higher interest rates.

For those not familiar with the Stronghold portfolio is a tactical asset allocation strategy offered by Saxo Bank through its managed portfolio platform SaxoSelect.The minimum investment amount is EUR 30,000 and the annual performance fee is 0.75%. The portfolio is based on a mathematical framework which aims to limit large drawdowns by dynamically responding to changes financial markets while aiming to provide stable returns. Saxo clients can invest in the Stronghold EUR portfolio through SaxoSelect in the trading platform after a suitability test has been taken (see screenshot).