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Symphony Madness

In honor of the Final Four this weekend, Composer is hosting a competition of symphonies. For those outside the US or less interested in sports, the NCAA men’s basketball tournament is held every year in March to determine the national champion. Sixty-four schools play each other in a single-elimination format until one team is left standing.

For our face-off, we selected four symphonies with very different compositions: simple, complex, leveraged, and niche.

Imagine the following as an intimate interview with each contender. You know, get to know them and understand what makes them tick. And, for each symphony, I’ll give you my take on the strategy.  

The winner? The one you choose to invest in. 

Let’s take a look at the contenders:

Hedgefundie’s Excellent Adventure Refined

The Buffett

Dragon Portfolio 

Smarter Oil

Tale of the Tape

In the NCAA tournament, a team’s record throughout the season determines its seed. For our symphonies, we use annualized returns over the last ten years. 

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March 29th, 2012 - March 29th 2022

The seeding:

  1. Hedgefundie’s Excellent Adventure Refined

  2. The Buffett

  3. Dragon Portfolio

  4. Smarter Oil

As we know, past returns are not indicative of future performance. Your job is to pick the symphony that best fits your portfolio over the next ten years. 

Hedgefundie’s Excellent Adventure Refined

Hedgefundie’s Excellent Adventure became an internet sensation and was the topic of one of our earliest blogs. Now the refined version sits as the #1 seed in our competition. Let’s kick the tires and see if the symphony can live up to the hype. 

When I begin reviewing a symphony, I like to collapse all of the blocks so I can understand the logic. Then, I click into each bucket to see how each one works.

Hedgefundie's Excellent Adventure Refined investment strategy built in Composer's no-code visual editor.

This symphony is Risk-Off if SPY has experienced a Drawdown of 5% or more over the past two weeks. Otherwise, the symphony is Risk On. The core, Risk On, part of this strategy is a simple risk parity strategy of 55% UPRO (3x leveraged S&P 500) and 45% TMF (3x leveraged 20Y+ Treasuries). The Risk Off branch of the symphony equally weights gold, Treasury Inflation-Protected Securities (TIPS), and short-term bonds. This combination of relatively less risky assets offers a safe haven for the symphony in times of market stress. 

Using the allocation graph in the Composer editor, you can see how often the strategy shifts between each state.  

Allocation graph for a systematic HFEA risk parity investment strategy employing leveraged ETFs.

Remember from the Understanding Leveraged ETF blog that volatility can significantly impact returns. Hedgefundie’s Excellent Adventure Refined attempts to mitigate this issue and avoid large drawdowns by shifting to Risk-Off. 


Hedgefundie’s Excellent Adventure Refined is relatively simple and easy to grasp in a few minutes. I like that. However, it also employs leveraged ETFs, which ratchets up the due diligence and risk tolerance required by investors. If you need proof, look at the 1-year returns for the strategy: 

Hypothetical backtested performance for a Hedgefundie's Excellent Adventure variation.

A combination of falling bond prices and a pull-back in stocks was a potent 1-2 punch.

The Buffett 

Next up is The Buffet—the old guard. Of the final four, it’s the simplest strategy in the running. I commented on the symphony in the backtesting blog

“It’s easy to understand and implement, low cost and tax-efficient, and investors can set it and forget it. I’m gushing, but I love simple, effective solutions.” 

Warren Buffett's investment advice built with Composer's no-code visual editor for systematic rebalancing.

90% stocks and 10% short-term treasuries. That’s it. Using Composer, you can build it in 20 seconds (I timed myself). And, thanks to the platform’s automatic rebalancing, you never need to think about it again. It was also inspired by Warren Buffett. What else do I need to say? 


Given the significant allocation to equities, this is likely a symphony best reserved for folks with a long time horizon. In addition, there is no risk management built into The Buffett other than the small allocation to bonds. The backtest statistics show that The Buffett has an R Squared of 1.00, meaning the symphonies' return profile looks nearly identical to SPY.

Warren Buffett's investment strategy compared to investing in the S&P 500 directly.

March 29th, 2012 - March 29th, 2022

Dragon Portfolio

Close on the heels of the Buffett is the Dragon Portfolio, and based on its name, this symphony has the best mascot. But when considering its investment merits, I find it helpful to review the strategy’s origin. Much like the player profiles that help you understand the athlete on the court, a symphony’s origin story enables you to understand the motivations behind its allocations. 

Adapted from Artemis Capital’s Dragon Portfolio, the goal of this symphony is similar to Bridgewater’s all-weather portfolio: to navigate all market conditions. 

The Dragon Portfolio may be complicated, but you can break it down to understand how it works. It’s a good example of how multiple ideas can be combined into a single symphony. 

The symphony is split into five buckets, with the following weightings: 

The investment strategy allocation for Artemis Capital's Dragon portfolio built in Composer.

Let’s go through each bucket. 

Long Volatility: As we’ve discussed before, long volatility assets should do well when volatility spikes. These assets provide diversification because equities often perform poorly during periods of higher volatility. This bucket invests in a US Dollar ETF, a safe-haven currency, and a VIX futures ETF, which increases in value when expected volatility goes up. 

Trend and Momentum: This is a tactical asset allocation bucket. In plain English, it tries to select the best time to invest in each asset. The strategy looks at the previous year (roughly 252 trading days) and selects the best performer from the targeted exposure (e.g., S&P 500 ETF) or treasuries. This bucket contains global stocks, including the US, UK, Japan, and commodities.

Here’s an example of the symphony’s logic for US stocks:

An algorithmic investment strategy that chooses between US equities and treasury bonds.

Fiat Alternatives: Fiat currencies are what we think of as money today. US dollars, Euros, British pounds – these are fiat currencies. More precisely, fiat currency is money not backed by any commodity such as precious metals. The alternative of choice for the Dragon symphony? Gold. The symphony holds 19% of the portfolio in GLD, a gold ETF. 

Secular Growth: This bucket targets exposure to the long-term growth of the US economy. The best way to gain access to secular growth is by owning stocks. This symphony leverages the position by buying UPRO for a 3x leveraged position. 

Interest Rate Linked: Bonds are interest-rate-linked assets because as interest rates increase, bond prices go down and vice-versa. In addition, interest rates determine the coupon payment bondholders receive. This bucket invests in 3x leveraged long-dated treasury bonds through TMF. 


As I walk through this portfolio, there are a few things on my mind. First, it’s a relatively complicated strategy with multiple moving parts. So I have to ask myself, do I understand the symphony? I am reminded of a recent tweet (h/t Nate Tobik @oddballstocks). 

Fintwit tweet on when algorithmic trading can work.

It’s OK not to understand a strategy! There is a lot in the world of finance that I don’t understand, and I have no shame in admitting that. 

What are your choices if a symphony doesn’t make sense to you? You can do the research to understand it, find a trusted advisor, or pick an option that you do understand. The only wrong choice is investing in something you don’t truly comprehend because it “looks” smart.

My hope is that reviewing the Dragon Portfolio’s origin story and walking through each bucket of the symphony will give you a process for understanding complex symphonies going forward.    

Smarter Oil

Coming in as the fourth seed, Smarter Oil is the underdog. The other symphonies can boast significant annual returns, while Smarter Oil has only delivered modest gains. And much of those gains were realized in the last year. So, let’s unpack this symphony and try to understand why it may be a good addition to a portfolio.

Investors in the US are less exposed to the energy sector than they have been in the past, and that’s true for index fund investors, too. The energy sector comprised ~13% of the S&P 500 in 2009 compared to only 2% today. Does that leave investors more exposed to inflation? Possibly. One simple way to think about this is that investors pay more at the pump when oil prices rise, but their portfolios receive less of a lift from energy companies that benefit from those higher prices. 

The Smarter Oil symphony invests in oil through an ETF (DBO) but seeks to limit the impact of negative roll yield on oil contracts. Note: DBO requires investors to submit a K-1, which is an IRS tax form required for partnership income.

From the DBO prospectus:

“Negative roll yield” is a term that describes the adverse impact of an upward-sloping price curve for futures contracts, which makes it more expensive to replace expiring contracts with new contracts. 

What does that mean? Most oil ETFs own oil futures, not physical oil. The ETF must buy new futures contracts to maintain exposure to the commodity as old contracts are closed. If new ones are more expensive, investors pay steadily higher prices as contracts are “rolled” forward. This process of rolling contracts forward can create a drag on performance.

The Smarter Oil symphony attempts to limit the impact of negative roll yield by holding DBO only when it has a positive return over the previous 21 trading days. Otherwise, the symphony shifts to “Hedge,” which invests in relatively less risky assets like TIPS, gold, and medium-term treasuries to preserve capital. 

An algorithmic investment strategy that invests in oil and hedge assets using ETFs.


Comparing the performance of Smarter Oil to its underlying oil ETF, DBO, and another popular oil ETF, USO, you can see the dramatic impact on performance. Smarter Oil returned ~35% for the ten-year period, while DBO (-40%) and USO (-76%) were notably negative. 

Hypothetical backtested performance for DBO, USO, and an algorithmic oil trading strategy.

Would I suggest putting all of your money in Smarter Oil? No, I wouldn’t. But, if you are hedging further spikes in inflation, bullish on the price of oil, or diversifying your portfolio, Smarter Oil may be a better bet than simply holding an Oil ETF. 

Every Symphony Has a Story

So now that you have met the contenders, which symphony is the best fit for your portfolio? Which one would you choose? Maybe you’d eschew all four and instead pick one of your own creations. Or, unlike the NCAA tournament, perhaps you select more than one winner and use multiple symphonies across your portfolio. 

No matter what you decide, I hope reviewing these symphonies helps you improve your process for evaluating strategies. Each symphony is a story, and learning to read them can help you understand the strategies' logic and make informed decisions.

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