A short post today with an example of a different kind of capital efficiency. The first three portfolios are all 10% Direxion 3X Technology (TECL) and 90% catastrophe bonds. The name of each of the three is how often they rebalance.
All three outperform 60/40 with less volatility and a lower beta. It's not something that anyone should do with their money but it is a simple example of a concept we frequently discuss. A small exposure to a volatile holding is providing a lot of growth to the portfolio. If TECL does something hideous, that would be unfortunate but far from ruinous.
Diversifying the TECL sleeve would make sense but might not be crucial, clearly 90% in SHRIX is a terrible idea.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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