The Portfolio Personality Indicator

These portfolios are the regular Joes. They have a fundamental focus with many small positions in liquid markets, usually equities. They have well controlled leverage and scan the markets for opportunities on multiple fronts. Many multi-strategy mutual funds, ETFs, and alternative funds are this personality type. Even some hedge funds fit here. For example, Citadel's main portfolio. It is value-based, is C even though it employs leverage because it holds many positions based on differing themes, and is V because is goes with the winners at any given time among its many independent desks.

These portfolios are a systematic version of FQCV, where the system is looking at fundamentals such as price to forward earnings. They tend to be reversion oriented. When prices have taken off, for example, these signal a deviation from fundamentals, (maybe call it irrational exuberance), and lighten positions.

These portfolios come from scanning the world for market vulnerabilities or hidden opportunities and going after them aggressively, with leverage and size. A classic macro example is Soros. Pershing Square is an example for equities. These portfolios hold a small set of positions in big size, but nonetheless they need to be prepared to quickly get in and then out when the catalyst event occurs, or if it fails to materialize. 

These are the same as FQAV, but with a set rule of looking for opportunities, so usually have a quantitative flair, and when quantitative, will be A from leverage more than from concentration, because the edge that comes from quantitative methods is scanning for many opportunities. And the building of quantitative models requires more than a handful of big ideas for empirical tests.

This personality type is focused on big ideas, big both in terms of size and in terms of large impact. Thus A because of concentration and possibly leverage. The ideas can come from many quarters, so these are not formulaic or systematic. Each investment has its own narrative. 

The A for this personality type leans more toward illiquidity, coming either from concentration by piling into the "big trade" or holding positions that are inherently illiquid, than it does from excessive leverage. Buffet is in this personality type. Bridgewater's alpha fund also has this personality because its large size and focus on a few themes forces it to hold concentrated positions that are slow to be put on and liquidate, and Dalio's adherence to what he calls timeless and universal principles is a hallmark of S.

These portfolios are typical of an individual's buy-and-hold approach, investing for retirement. Holding for the long term, unlevered, and taking in ideas when they happen to fall onto their plate. 

Think of the tortoise -- slow and steady wins the race. These portfolios are pretty boring. Hold a long time, in a conservative way, based on set rules. One place you see this is with a pension portfolio.  It is both C and S because, among other things, the rules are dictated by the board. And the board is not there to watch day to day, might not have a lot of expertise, and is on the hook if something goes wrong. 

Although it is common for T broadly, this personality is the main depository for momentum, for going with the trend, whether in terms of prices or volatility. Tactical asset management, risk parity, Bridgewater's all weather fund are examples. Rules based and focused on market technicals: Looking a market action in the case of TAA, looking at relative volatility in the case of risk parity. Although these portfolios might not change often, they are Q because they have to be quick on their feet in order to adjust positions, sometimes in a big way, when signals require it. 

During times of market dislocation, this portfolio will step into the breech to provide liquidity. Doing so requires being fast on the draw when the liquidity demand becomes manifest, and a liquid and low risk posture so as not to get drawn into the fray and become a liquidity demander itself. Also in this camp are disciplined market makers -- liquidity suppliers in the short term who buy or sell when they see an overhang on one side of the market. It is the discipline that makes for the C in this personality. 

If you are a quant looking for action, this is home base. Technical rules, operating with leverage and short time frames. At the extreme in that regard are high frequency shops. Also most CTAs. And relative value trading. Two Sigma fits here (although they also have a fundamental side), and the embryonic DE Shaw.

These portfolios are the life of the party. Focused on the crowd, fast witted, ready with little surprises. Use market views in whatever works, and go with the winners. Millennium is the poster child here, and a V because it goes with the winners from many independent traders, each with their own models.

Momentum and factor based with a longer term investment approach, AQR being a prime example. Convergence trading, a longer-term version of relative value trading fits into this type. 

This is the type for longer-term chartist, either explicitly or indirectly. The key differentiator between this and TMAS is a propensity toward story telling, looking at the market and coming up with a narrative on how things will unfold, as opposed to employing a cookiecutter regimen. 

This is the technical version of the tortoise's "slow and steady" in the FMCS personality. Decisions are made based on the effect of market moves rather than economic fundamentals, but the basic personality beyond that is similar to a pension fund. Actually, this is an alternative pension fund personality. Because it is following a benchmark, or staying close to the target. Maybe plus or minus 5% in this or that direction. close to target, making changes based on market deviations. 

This is a laid-back type, buy-and-hold, go with the flow, keep low risk. Yawn. Typically using momentum, looking for whatever stock stands out from the crowd based on price action or going into the market when there is talk of new highs.