Similar to the All Weather portfolio, the Dragon takes a slightly different approach focusing how to survive a number of different situations from inflation to deflation to just general batshit craziness. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. The Dragon Portfolio is based on historical research stretching back to the 1920s that sought to identify the most effective portfolio not just over the last few decades, but the long run of history. Artemis is a long volatility manager, after all, and talking up their book, so to speak. The performance data for various Commodity Trading Advisor (CTA) and Commodity Pools are compiled from various sources, including Barclay Hedge, RCMs own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. And that's the point. The five components of the Dragon Portfolio have a low correlation to one another, and they each perform differently in different economic environments. In our opinion, investors tend to focus too specifically on the risk characteristics of a single investment, as opposed to the overall portfolio. Obviously, we can get into that a little bit more, but I wrote the paper prior to the COVID crisis. On Tuesday, February 9, 2021, a trademark application was filed for ARTEMIS DRAGON PORTFOLIO with the United States Patent and Trademark Office. Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own. In the wake of 2008, one thing in particular became clear: traditional approaches to diversification were not working. Since we wrote this post (and Chris wrote the original piece), volatility has exploded, both during the massive sell-off in March as well as in the shocking market melt-up since then. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA. WebThe Philosophy of the Dragon Portfolio The solution to the successful 100-year portfolio is unbelievably simple when you study financial history: find assets that can perform when Artemis' Dragon portfolio is designed to have components which profit from both times of secular growth with those of secular decline. Recent history has certainly borne him out as 2020 which saw the presence of all three market regimes created a perfect laboratory test for Mr. Coles thesis which in turn generated a 50% return for his Dragon portfolio versus only a 15% gain for the 60/40 mix. So, when we were sent the latest research piece by Chris Cole of Artemis, we dug in (you can read the piece here). To show this effect, we rank major hedge fund indices by CWARP and show their effect on a portfolio of Equity Beta and 60/40. The answer for Artemis is what they call the Dragon portfolio. This is what we would expect true diversification to look like: over a 40 year period which included periods of growth, recession, inflation, and some deflation, the Permanent Portfolio chugged along providing solid returns with much more manageable levels of risk. It's having hurricane insurance that doesn't just rebuild your house, but leaves it better than it was before the storm - at a compounding non-linear rate. If youre interested in learning more, please fill out the form below and we will send you more information. Simple enough but how exactly do you go about this, much less test it going back 100 years. The dark blue line in the chart above shows the historical performance of the Hundred Year Portfolio, which begins in January 2005. From COVID to war, we dont know what can send the market tumbling next. This was the portfolio allocation which not only performed best historically, but was robust to different economic and market environments. Trend following allows you to catch these major movements. by Uncorrelated Sat Oct 10, 2020 5:32 pm, Post Long volatility is a strategy that seeks to benefit from periods of high volatility. While other portfolio allocations only performed well in certain conditions, the Dragon Portfolio was able to perform positively regardless of conditions, during periods of both secular growth and decline. Christopher R. Cole, CFA, is the founder of Artemis Capital Management LP and the CIO of the Artemis Vega Fund LP. 12 Jan 2022 By doing so, you and %USER_NAME% will not be able to see The Artemis Capital Dragon Portfolio (Explained) You know Chris Cole from his firm Artemis Capital and numerous appearances on Real Vision and Macro Voices. From a portfolio construction perspective, this is ideal, and explains why the Dragon Portfolio is robust to different market conditions. And thats the point. FZ. It is as though the massively volatile year of 2008 repeated itself for a decade. I have already added a pretty large allocation to gold to my portfolio, and I am very happy with it. market regimes created a perfect laboratory test for Mr. Coles thesis which in turn generated a 50% return for his Dragon portfolio versus The good news is that its easier to become one these days. What would it have to look like to not just end up erasing all of the boom time gains (the serpent) and in the inevitable busts (the Hawk). Granted these far from perfect proxies but they would comply with the spirit of Mr. Coles thesis that robust performance depends on the preparation for every possible market regime. Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. Thats why Mr. Cole recommends professional money management of the portfolio as the only true way to achieve its results. The optimal portfolio, since 1929, included risk weighted combinations of Domestic Equity (24%), Fixed Income (18%), Active Long Volatility (21%), Trend Following Commodities (18%), and Physical Gold (19%). What does a portfolio look like over many, many, many different investment cycles spanning booming growth, nasty drawdowns, inflation, stagflation, and everything in between. https://t.co/ApBBKdNYhp. As such, they are not suitable for all investors. Copyright 2021, Were Back!! If a parent has the These performance figures should not be relied on independent of the individual advisors disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisors track record. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. What would it have to look like to not just end up erasing all of the boom time gains (the serpent) and in the inevitable busts (the Hawk). However, I In a period of structural growth these asset classes do very well, and baby boomers had great returns, but what happens in a time of crisis, when deflation or inflation rear their ugly heads? Well, a dragon is a combination between a hawk and a serpent. As well, they touch on the problems with Sharpe ratios and Coles new metric, CWARP, which is inspired by advanced sports analytics and looks to determine whether adding a strategy actually helps improve your portfolio, adds more of the same, or worst of all, if it hurts your portfolio. Witness the disastrous performance of the OIL ETF when the futures market went into negative pricing. in the near term, that it will be there when we need it. I figure the odds be fifty-fifty I just might have something to say. Long volatility is magic, it just needs patience. It can go through periods such as 1980-1999 or 2010-2019 where it puts up a lot of points. Yet, here we are. Im an optimist, but sometimes shit just hits the fan. The maximum drawdown was reduced by 66% (the worst daily drawdown was -18% for the Permanent Portfolio vs. -53% for stocks). by JackoC Sun Oct 11, 2020 12:55 pm, Post Artemis Dragon portfolio is designed to have components that profit from both times of secular growth with those of secular decline. Building on these approaches, Mutiny Funds saw three key areas where we felt Brownes approach could be improved and set out to build our own approach, the Cockroach portfolio. Disclaimer: However, our core belief has always been that long volatility is only a part of a broader portfolio. But I believe all instruments should be available in all EU-countries (and the SEK is fairly closely following the Euro, so results should be similar). by Forester Sun Oct 11, 2020 6:21 am, Post WebThe dragon portfolio is a portfolio construction that was presented by Christopher Cole in his 2020 paper The allegory of the hawk and serpent - How to build a portfolio that lasts 100 years. In this part we consider Mr. Cole alternative portfolio an investment thesis that he calls the portfolio for 100 years that is constructed quite differently from the traditional 60/40 stock/bond mix. This can certainly happen with a simple bonds and stock portfolio as there have been many periods in history when both stock and bonds fell at the same time, most recently during the pandemic crash of 2020. We do not allow any sharing of private or personal contact or other information about any individual or organization. Brownes Permanent Portfolio approach was a step in the right direction towards our objective of maximizing long-term wealth while letting us be confident that ourselves and our families will have the financial resources to deal with what life throws at us. In a 2020 research paper, theAllegory of the Hawk and the Serpent, Chris posed the question: What is the optimal 100-year portfolio?. In addition, any of the above-mentioned violations may result in suspension of your account. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' by Register44 Sat Nov 21, 2020 2:40 pm, Post ), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. We launched our Long Volatility and Stocks Strategy in July 2020 to offer a more balanced and diversified approach that included both long volatility and stocks in a single product.

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