ALPHA and BETA outperformed BTC in the past 3 months with higher return and lower risk
The official result is out and it’s impressive. Alpha and Beta performed better than BTC. Granted that we are in a crypto winter cycle. But, you can’t argue with data. Risk Parity works in defi for the past three months.
Our risk parity investment system has started to lay the foundation for a solid track record.
The second version of our Alpha Fund (Alpha V2) was launched for community testing on July 5, 2022. Our Beta fund has also been live since July 5, 2022 for community testing.
The product has gone through a significant amount of internal and community testing on the mainnet environment across three chains with real money by the team members.
Below we provide a brief summary of the performance of our investment funds.
Formation Fi Investment Fund Performance Updates — as of Oct-12–2022
- From Inception (July 5, 2022) till Oct 11–2022, Alpha and Beta have achieved a return of around 7.36% and 9.64% respectively. As a point of comparison, we note that the Bitcoin (BTC) return for the same time period is around -5.4%.
- The key aspect to highlight is that Alpha and Beta have outperformed BTC by around 12% to 15% while their risk has been lower. Risk, as measured by volatility or the standard deviation of returns, has been around 51.47%, 55.73% and 57.49% for Alpha, Beta and BTC respectively. Keeping with the usual convention, the volatility figures have been annualized.
- The maximum drawdown, or the lowest price minus the highest price divided by the highest price, over the same time period is -20.51%, -21.68% and -24.06% for Alpha, Beta and BTC respectively. This indicates that the troughs and peaks of Alpha and Beta prices are closer than the corresponding high and low prices of BTC.
- In Alpha the best P&L contributors since inception have been: CAKE (+39.75%), ETH (+19.21%) and BNB (+13,8%).
- In Beta the best P&L contributors since inception have been: ATOM (+54,8%), SUSHI (+25,9%), XRP (+43,7%) and QNT (+27,9%).
- Given the prevailing sideways trend in crypto prices, and the rising interest rate environment surrounding the US dollar to combat high inflation numbers, we are holding upwards of 20% of our fund value in cash or cash equivalents.
- After the latest round of inflation numbers are released this week in the US, we will add new vault positions to Alpha and additional tokens to Beta.
We wish to remind all our investors and $FORM holders that we are still methodically ramping up the speed of our investment machinery. The analogy to keep in mind is this: If we could state that we have built our investment vehicle to run at a speed of 200 miles per hour. We are currently running it only at 20 miles an hour.
The reduced speed of investment operation is because we are still testing numerous scenarios and making sure the security mechanisms, the risk management guidelines, investor protection features, and the weight calculations are happening exactly as we intend them to function. In addition the frequency with which we rebalance our funds is being done at a slower pace. Also we are still not investing in the full range of assets that have been selected for Alpha and Beta. We can expect that we will switch gears slowly over the coming few days as we launch parity and conclude additional testing.
Gamma also went live on Aug 1, 2022. Though we are still finalizing a few more yield enhancing mechanisms and negative correlation providers for Gamma including stable coin pools, derivatives, gold and other such diverse yet return bearing instruments.
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