All you need to know about the Multi Factor Tactical portfolio

by Sonam Srivastava

Published On Aug. 14, 2019

In this article

What is the rationale behind it?

The rationale of this strategy can be broken down into two themes:

Dynamic Asset Allocation

Let us look at the equity markets in the two recent time periods — the year 2017 and 2018.

Nifty Performance 17-19

Now, look at 2 portfolios:

  • One with 80% allocation to equities and 20% to bonds
  • The other with 20% to equities and 80% to bonds
Performance comparison

The equity majority portfolio has better performance in 2017 but the bond majority portfolio gives better risk adjusted returns in 2018.

We choose the best asset mix using stocks along with bond and gold ETFs in the two different types of market regimes.

The regimes are predicted using a model that looks at short term and long term price patterns and economic data. We chase the equity market trend when the market is favourable and try to control the risk when it is not

Market Regimes

Stock Selection

While we trade bonds & commodities through ETFs, the choice of stocks in the portfolio comes from equity factor models or the popular name smart-beta. The individual equity buckets chase factors like:

  • Momentum or trend following
  • Value or choosing the undervalued stocks
  • Growth or choosing high growth stocks
  • Quality or choosing the stocks with good earning quality

How has been the performance?

We have been live for 10 months since July 2019, here’s how the performance has looked like:

Multifactor tactical 1Y
The portfolio has done well is trending times and has also suffered much lower drawdowns during the market crash in March 2020.

The backtested performance of the model since 2014 looks like this:

Past Performance Max

How does it perform during market crashes?

When the markets crashed in March 2020 led by coronavirus fears, our portfolios stood out based on the principles of dynamic asset allocation

Multifactor tactical 3M

While the markets suffered a drawdown of ~30% the portfolio only dropped ~5%

How can I invest?

Indian retail investors can invest via smallcase here:

Details on the steps to invest and the plans is detailed here:

Our Investment Philosophy

Learn how we choose the right asset mix for your risk profile across all market conditions.

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