Greetings,

Gamma Goblin Update
Gamma Goblin, our steadfast performer, continues to yield steady returns. Its real monthly information ratio now stands at 1.44, aligning with our projections. While the QQQ benchmark is closing the gap, Gamma Goblin remains ahead, outperforming by 4.9% since its inception nearly two and a half years ago. This success is largely due to its capacity to avoid drawdowns during volatile periods—a feature we deliberately designed. Although it may underperform in consistently rising markets, we believe this approach ensures long-term stability, as market corrections are inevitable.

The Sage Performance
The Sage has not performed as well as we had hoped. After nearly a year, it is underperforming both of its benchmarks: GVIP by 8.79% and SPY by 1.37%. We are closely monitoring this situation. While this is disappointing, the strategy is designed to excel during downturns, which we fortunately have not experienced recently. Should underperformance persist, we will consider reducing the allocation to this strategy. Our core belief remains that controlling drawdowns is crucial, as market downturns are a certainty. We expect the Sage to prove its worth during the next market correction, unlike its long-only benchmarks that have struggled in past downturn cycles.

Research Developments
On the research front, we have been rigorously working on our asset allocation models. Reconstructing numerous academic articles, we have found that many do not perform as claimed when tested out of sample. This has allowed us to rebuild around 15 models more robustly, enabling us to switch between them effectively. Our ultimate goal is to allocate across all our strategies using these improved models, and early results are promising. Notably, during our research, we stumbled upon a potential new long-short alpha generating process, adding an exciting dimension to our research agenda. This unexpected discovery underscores our belief in the value of research: by exploring, asking questions, and remaining curious, we uncover many valuable insights.

As we refine our strategies, we converge on a global operating motto: avoiding drawdowns is paramount. This focus will guide our navigation through market uncertainties.

Enjoy the summer. Personally, I look forward to indulging in tennis and visiting Wimbledon—a passion of mine. I leave you with a thought-provoking note I found on LinkedIn, comparing tennis to investing, emphasising the importance of avoiding mistakes, particularly drawdowns in our context.

LinkedIn Post on Markets and Investing

Best regards,

Derek
Sterling Alpha Group