Consolidating DARWIN risk levels

Major changes will be deployed to our investor platform next week. As part of the upgrade, DARWINs will only be offered with 20% monthly Value at Risk (VaR) going forward.

We have made this decision to:

  1. Align the risk of a well-diversified DARWIN portfolio with that of a Tier-1 stock index (see below)
  2. Simplify all UX interactions in the interface
  3. Align with customer choice: the large majority of customers built portfolios with 20% monthly VaR DARWINs

How to replicate your current risk?

For investors who were investing in legacy 5% and 10% VaR DARWINs up to now, the solution is simple.

Minimum investment per DARWIN stays at 50 EUR/GBP/USD (ever found a hedge fund that allows you to invest that amount?).

To continue risking exactly as much as up to now, all it takes is to:

  1. Invest 50% as much into the 20% VaR DARWIN as invested in the legacy 10% monthly VaR version
  2. Invest 25% as much into the 20% VaR DARWIN as invested in the legacy 5% monthly VaR version

How risky are DARWIN portfolios?

Portfolio VaR for a DARWIN portfolio investing in non-to-low correlated DARWINs is about 10%.

To put into tangible words: if you start any given investment month with a well diversified DARWIN portfolio (typical correlations across DARWINs range between 0 and 20%) and go on holidays to a desert island for a full trading month, on return, you can expect:

  1. On 19/20 months (95% of months), you will do better than losing 10%
  2. On 1 /20 months (5% of months), you will lose 10% or worse

By the way, the bigger the loss, the more unlikely – e.g. if a loss of 10% or more was to happen, the odds for a 20% loss are exponentially lower than those of an e.g. 11% loss.

Monthly evolution of S&P 500

The above odds are roughly similar to what you can expect investing in the S&P 500 or FTSE 100 – e.g. a DARWIN portfolio is about as risky as investing in an equity index – e.g. a risky investment.

(BTW – if you allocate on a Darwinian basis, the odds are possibly better than above, but that’s up to you 🙂



0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *