How Obsidian performs during selloffs
The previous post ( https://obsidianaiadvisors.com/news/drawdowns-the-bane-of-asset-managers ) illustrated that the Obsidian-Russell Portfolio suffered lower drawdowns and spent less time ‘under water’, compared to the IWM. In this article we study in more detail how it performs during periods of selloffs.
The IWM has experienced three drawdowns of greater than 10% from its High-Water Mark during the period: 1 February 2013 to 20 November 2019.
In each case the Obsidian-Russell both lost less and recovered, back to its High-Water Mark, quicker than the IWM. In fact, during the latest drawdown (31 Aug 18 to 29 Nov 2019) the IWM still has not recovered from its 27.3% fall, whereas the Obsidian-Russell only lost 6.3% and recovered in 9 days.
The graphs show that whilst the Obsidian-Russell did suffer drawdowns, they were neither deep nor long lasting. This resilience was achieved through judicious capital allocation, within the Portfolio Management System, which correctly anticipated the selloffs and moved out of riskier stocks and, in some cases, into cash completely.
It was able to do this as the decision-making process is based on true Machine Learning.
Faisal Khan (Dec 2019)