Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I suppose one reason not to own it is it seems fairly easy to execute this strategy yourself without paying a management fee by buying out of the money put options. Moreover, you could tailor your purchases more closely to your actual portfolio.
It did well during the COVID correction. How much do folks think they would need to hold to make a meaningful difference in a bear market? Charles Lynn Bolin has noted it several times in his nutrient dense articles. I think Meb Faber said he has 25ish percent of his money in TAIL although I feel like he was ambiguous as to whether this was personal portfolio vs his net worth since he own Cambria.
I had owned TAIL recently after instead using SDS for hedging earlier on. Such investments end up being somewhat expensive market "insurance", since equities tend to go up maybe 75%- 80% of the time.
Learned that I'd rather just own more conservative investments instead (or move to cash) if I'm getting nervous.
SWAN might minimize its losses on its own but it’s not going to provide protection to existing positions like TAIL will.
True, perhaps, but in order to use TAIL as protection to your portfolio as a whole you would need to own a ton of it, and it simply is not a great long-term holding IMO. It has suffered a 14.27% drawdown and TAIL's webpage itself notes that "Cambria expects the fund to produce negative returns in the most years with rising markets or declining volatility." The only way I personally could see TAIL being a sensible choice is as part of a market-timing strategy, and that mostly doesn't work. For the core of my portfolio I'd much prefer to ride the market and limit losses with SWAN or even MNWAX.
I don’t think most people need to hedge their whole portfolio. You can make TAIL a 10% position and get good risk adjusted returns with it. I don’t trust tactical portfolios even if they are rules based anymore because they mostly stink and aren’t consistent so it’s good to see more options becoming available.
Comments
https://www.cambriafunds.com/tail
Learned that I'd rather just own more conservative investments instead (or move to cash) if I'm getting nervous.