The Share Wealth Systems SPA3 Investor US Equal Weighted Leveraged Public Portfolio Investment plan has had a recent amendment to the Risk Management rules in section 4.
The changes relate to Portfolio Margin Utilisation.
No new positions will be opened while the portfolio’s Margin Utilisation % is equal to or greater than 75%
Currently open positions will be closed one by one while Margin Utilisation % is greater than or equal to 80%, starting with the lowest RS (ROC 126) open position.
You can download the most recent version of the Leveraged Investment Plan here.
Please note that there has been an additional change to the SPA3 Investor US Equal Weighted Leveraged Public Portfolio.
In light of recent market conditions, and the effect this has had on the performance of the leveraged public portfolio, we have taken a further step to reduce drawdown by reducing the Nominal Injection for Position Size (located in the money management section of the portfolio setup).
The reason for this change is that position sizes need to be reduced as they have become too big for the remaining Cash Balance in the portfolio. We have come to realise that the position sizing and portfolio exposure that we have used to date has been too aggressive to handle the type of down market that we have experienced since Nov 2021, in a leveraged environment.
Portfolio exposure will be reduced going forward - the “Nominal Injection for Position Size” is the lever that controls position sizing in a leveraged portfolio, and hence overall Portfolio Exposure.
The original value used for the Nominal Injection for Position Size in this portfolio was $100,000.00
After adjusting, the new value used for the Nominal Injection for Position Size in this portfolio is $64,017.00
For further reading on how this figure was calculated, please refer to this document: Reducing PS NPV to Reduce Position Sizes.
As always, we try to be as open and transparent as possible with regard to the performance and management of our portfolios. If you have any questions, or anything you would like to add, please continue the discussion below so that all our members can learn from this.
For those using leverage with a SPA3 Investor portfolio, note that the US Equal Weighted Leveraged Public Portfolio has modified its position sizes for Fri 26 Jan 2024.
The Position Risk rose above 30%, meaning that positions had become too large relative to the Cash Balance in the portfolio ($5,948.46 / $19,439,40) = 30.6%.
The rule is to reduce position sizes when Position Risk exceeds 30%.
This is achieved by reducing the Nominal Portfolio Value. This was done today from $58,519.11 to $45,624.63, reducing the Next Position Size to $4,593.25.
This also increases the Invested % to 221%, meaning that currently open positions need to be exited to reduce this to 160%, starting with the lowest Relative Strength (RS) as measured by ROC 89.
CROX, valid exit signal, DINO, SQM and ILMN will be exited to reduce Invested % to 158.2%.