How we outperformed the S&P500 while almost quadrupling investment income during the Covid19 Crash.
Initial indications of Covid19 were made public in December 2019, however the market started reacting to the pandemic in late February 2020. Our team was closely monitoring various data points and decided to exit many public investments right after the downturn had begun while using financial derivatives on the remaining investments to hedge against the downside. With a large allocation to cash and a healthy liquidity position due to uninterrupted income distributions thanks to insurance, we were in a strong position to deploy our capital at the time we thought was right. Our first entry point happened right before the trough of the March 2020 crash, following which we were consistently investing into the public markets contrary to many public opinions at that time, which allowed us to be one of the first market entrants taking advantage of one of the greatest market recoveries that ensued.
Highlights of our analytics and modelling included:
- The effective use of financial derivatives to maintain and enhance liquidity while the market was crashing (mainly through the sale of specific call options)
- Re-adjusting sector allocations to position us for faster recovery on formerly invested capital
- Monetizing volatility through specific insurance positions
- Modelling US Fed actions alongside select local Italian Covid19 data for entry signals