2015 was a difficult year for investors and professional hedge fund managers alike. Last December’s -0.77% aggregate hedge fund industry return pushed the annual aggregate returns further negative, ending at -2.01% for the year.
Despite overall hedge fund returns being negative for 2015, the distribution of returns across the funds was nearly even in terms of positive vs. negative annual performance (49% positive, 51% negative). The positive average return was 8.12% and the average negative return was -9.87%.
One of the major challenges in 2015 was that markets went nowhere and created lots of false and deceptive trends. Prior to 2015, the markets had seen strong trends almost every year. I believe that 2015 was a transition year and marked the end of the six-year bull cycle.
So how did the model portfolios fare?
The World Cup Portfolio's 2015 Return was +19.4%
Let's start with the World Cup Portfolio (WCP), this portfolio is the oldest portfolio of the group. It trades futures and because of the nature of the futures market is naturally leveraged. The futures markets were not immune to the difficult market conditions that persisted throughout 2015. There were exceptions, notably the strong downward trend in crude oil proved to be this portfolio's biggest winner for the year. The biggest loser was the Dollar Index, which lost money in three of the four quarters. Overall the WCP made money in three of the four quarters and produced a return of 19.4% for the year. While this was a positive return, it was somewhat disappointing as it was the lowest annual return for the past seven years. You can learn more about this portfolio here.
The Perfect Portfolio's 2015 Return was -6.18%
The Perfect Portfolio is designed for retirement 401(k)s and IRAs and only takes long positions in the ETF market. This portfolio was not immune to the difficult trading conditions of 2015. The Perfect Portfolio trades four ETFs, the ETF GLD which tracks gold, USO which tracks oil, SPY which tracks the S&P500 and finally FXE which tracks the Dollar/Euro relationship. Last year this portfolio did not have any positive quarters. The average return for this portfolio for the past seven years has been 5.2%. This portfolio has been traded for seven years and is designed to protect retirement capital. You can learn more about this portfolio here.
The Internet Portfolio's 2015 Return was +17.5%
The Internet portfolio is the newest model portfolio and in 2015 celebrated its third year. This particular portfolio trades five stocks, Facebook (FB), Netflix (NFLX), Yelp (YELP), Yahoo (YHOO) and Amazon (AMZN). This particular portfolio produced losses in Q1 and Q2 and made money in Q3 and Q4. The biggest winner was Amazon (AMZN), followed by Netflix (NFLX) and Yelp (YELP). Over the past 3 years, this portfolio has averaged a 33% return. You can learn more about this portfolio here.
What's Ahead For 2016
That is a question that no one can answer with 100% certainty. What I can say with 100% certainty is that there will be change. The markets will change and that creates equal trading opportunities. That is what I want and I am expecting in 2016. Change does not automatically guarantee profits and losses are always possible in the short-term. For the longer term, the key is to go with what works and what works is having a consistent game plan and a disciplined approach.
Stay focused and disciplined.
Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
