March was a hot month in the world, on vacation in Thailand and at 3xGTAA! Here is the report:
Asset-Performances 03/26 (27.2-30.3.)
3xEU50: -28.0%
3xGLD: -37.1%
2xWTI: +82.0%
3xGTAA Depot
27.02.26: 128.040€
30.03.26: 143.730€
Wikifolio certificate
27.02.26: 197,22€
30.03.26: € 224.87 (mid-price)
Month: +14.0%
YTD: +37.8%
Review 03/26
March was an extreme month for 3xGTAA. The war in Iran has shaken up the markets and continues to do so. The stock markets fell sharply, which was to be expected. It was less expected that the crisis currency gold would fall even more. On the other hand, WTI was able to rise so significantly that it more than compensated for the price losses of the EU50 and GLD and led to a successful month overall. A wonderful example of the power of a portfolio with uncorrelated asset classes! Due to the significant imbalances in the portfolio in the meantime, a new rule for intra-month semi rebalancing was introduced. More on this in the workshop report.
Outlook 04/26
The current developments on the markets have basically pushed all risk assets except commodities below their signal lines. Gold is still trading just above, oil well above. The crisis currency USD has thus moved into third place (ahead of short EU Gov Bonds).
The allocation for 4/26 is therefore:
2xWTI
3xGLD
5xUSDEUR
The model has now fully switched to crisis mode. This is another advantage of momentum models such as 3xGTAA: they can be used to make money in a wide range of scenarios. While equity portfolios suffer in uncertain times, (well-balanced) momentum models can still go up (of course only with probability and without guarantee!).
Report from the 3xGTAA workshop - New risk reduction rule
As indicated above, there were two occasions in March when an asset (WTI) reached a weighting of around 50% in the portfolio. The problem with this is that it contradicts a basic idea of 3xGTAA: risk parity.
The different leverages of the assets held (e.g. 2xWTI, 3xGLD, 3xEU50, 5xUSDEUR) result from the fact that each asset contributes the same risk to the portfolio. The prerequisite for this, however, is that the assets are equally weighted. If one asset makes up 50% of the portfolio and the other two only around 25% each, then it contributes disproportionately to the overall risk. So in order to stay true to the basic idea of 3xGTAA, I have decided to introduce an additional rule that will be applied from now on: "As soon as an asset reaches a weighting of approx. 50%, it will be reduced to approx. 40%. The income is held in cash until the end of the month and reinvested normally at the next signal."
Why exactly this rule? I have not done a concrete backtest with this rule, unfortunately I don't have the day-to-day data. The basis is an attempt to find a sensible middle ground between the initial weighting of 33% and the extreme weighting of 50% (which is around 40%). The cash is not reinvested directly because the other assets naturally have a strong downward momentum in this situation. Apart from reducing the portfolio volatility or the effective leverage contribution of the assets, the rule should not have any significant impact on the model.
I assume that the application of this risk reduction rule will remain an exception anyway. But fundamentally it remains the same: GTAA is a process, not an outcome. The model is fixed in its general principles and concrete rules. However, if there are situations in which there is a contradiction between the two, the principles must be clearly formulated once again and the rules adjusted accordingly. This is how every rule-based system works if it is not to become rigid and one day break down in the face of reality.
And one more thing: you can see from these situations and considerations that 3xGTAA is more than just a clever momentum model in a wikifolio wrapper. It is basically an economic-philosophical project that has set out to counter the efficient market hypothesis with an inefficient market hypothesis. And the latter must be prepared to adapt to the realities of the market without falling into the traps of behavioral finance. For this reason, 3xGTAA will always remain a process.
And now may the momentum be with you!
Your Epi
https://www.wikifolio.com/de/de/w/wf03x0gtaa
