Dear Investors,
Markets had a tough January with plunges of over -12% on the SP500, over -17% on the Nasdaq and nearly -9% on the EuroStoxx 50 between the highs and the lows in January with, moreover, a violent sector rotation.
The entire Seven Force Range of Funds started the month with an almost maximum equity allocation (61% out of 65% on the Seven Force 5), as the Medium/Long term trends are still bullish.
The violent and rapid correction made it possible to put risk management to the test and to assess the level of Draw-Down (decline compared to a high) as well as the reactivity of the strategies in the face of this type of Market shock.
First, the responsiveness of the strategies allowed a reduction in exposure from 61% to 51%, and this reduction could accelerate rapidly if the markets were to continue their descents, thus preserving capital from greater losses.
Secondly, the Draw-Down level (Retreat from a high) of -5,3% remains within its standard range since the Seven Force 5 has already experienced a decline of nearly -12% in 2015 in its version 1 and is calibrated around -10% in version 3.
These levels represent a very good opportunity to enter the funds, the downside risks being limited by the levels of reversal of the strategies and the capacity of the fund, which keeps an equity exposure at 50%, to return to its highest in the event of a market upswing.
As we know, downturns are often good opportunities to buy a fund. This is all the more true for the funds in the Seven Force range, as these are built partly around a maximum potential decline with the ability to be completely disinvested in the event of a major crisis. Therefore, the closer the fund gets to its max historical draw-down, the greater the buying opportunity.
Below is the chart of Seven Force 5 Version 3’s maximum Draw-Down on a monthly basis, allowing you to position the level in relation to its history.
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