Alpha Capture ETF Portfolio
​Beyond 60/40

Portfolio Manager Commentary: April 2025

This analysis discusses the performance of the Alpha Capture ETF Model Portfolio in April 2025, noting its underperformance compared to its global 60/40 benchmark despite outperforming other trend-following strategies. Key factors contributing to the underperformance were exposure to US equities and a lack of non-US government bonds, although positive selection effects from assets like gold helped mitigate losses. The report also highlights portfolio adjustments made effective in May 2025, including reducing US equity and intermediate-term Treasury exposure while increasing European equity and international government bond allocations, aiming to better align with the benchmark's international focus. Ultimately, the portfolio aims to capture long-term trends despite its higher risk profile.

​Not investment advice.

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The Alpha Capture ETF Model Portfolio declined by -1.29% in April, underperforming its global 60/40 equity/bond benchmark by -204 basis points (bps). Exposure to US equities and avoidance of non-US government bonds contributed to underperformance. However, the portfolio significantly outperformed other trend-following strategies the SocGen CTA and Trend Indices, which declined by -5% in April. Trend following strategies typically struggle during abrupt market swings, but deliver competitive returns when market trends stabilize.

Although the Alpha Capture portfolio maintains an underweight allocation to equities, its 35% US equity weighting in the portfolio had a substantial contribution to the overall decline. In contrast, non-US equities, which account for 60% of the benchmark, posted a slight gain in April. Non-US government bonds, which accounts for 40% of the benchmark and is absent in the Alpha Capture portfolio, also posted a slight gain in April. Overall, the benchmark’s higher allocation to non-US assets limited its drawdown amid heightened volatility. 
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Despite negative allocation effects, the portfolio benefited from positive selection effects, particularly from gold, which delivered a robust +5.45% return in April. The Horizon Kinetics Inflation Beneficiaries ETF (INFL) also contributed positively because of its exposure to financial stocks.

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​In April, the portfolio’s allocation to the iShares 7–10 Year Treasury Bond ETF (IEF) was increased to 20%. This intermediate-term fixed income ETF increased by +1.06% and provided some downside protection as equities continued to decline. While the Treasury gain was in-line with the benchmark’s non-US bond holding, its lower weighting combined with US equities muted its contribution to the portfolio’s total return.
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The portfolio declined -1.88% year-to-date (YTD) versus a +0.85% gain in the global 60/40 equity/bond benchmark and a -4.72% decline in the S&P 500 and a -10% drop in the SocGen Trend Index. Meanwhile, the All-Weather portfolio outperformed with a +4.19% gain YTD because of its lower risk profile. While the All-Weather portfolio’s exposure to Treasuries, non-US equities, and gold limits substantial drawdowns, it has a record of prolonged underperformance versus the S&P 500, especially during trending environments.

Although unusual, comparable returns can vary widely during volatile periods. Nevertheless, it is important to align expectations with a portfolio’s long-term objective. The Alpha Capture portfolio seeks to capture long-term relative trends that may compensate for its higher risk profile. We believe that incremental shifts toward the benchmark’s non-US exposures can narrow the portfolio’s underperformance over time, while maintaining a lead versus the S&P 500 and trend following proxies. 
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April proved to be a challenging period, but the portfolio was able to deliver a competitive total return versus a range of benchmarks, consistent with its long-term record of outperformance. We remain disciplined in our approach, guided by long-term shifts in relative strength and momentum.

New Portfolio Changes, Effective May 1, 2025:
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• Reduced US equities to underweight and added European equities. This change shifts the overall equity allocation closer to the benchmark’s international exposure. 

 

• Removed the tactical sector position, which previously provided a defensive hedge, based on negative momentum signals relative to broader equity indices. ​ ​

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• Added international government bonds and reduced intermediate-term Treasury bonds. This change results in a slight underweight to US fixed income and shifts the overall bond allocation closer to the benchmark’s international exposure. ​