Downside Protection During Big Market Drawdowns

QMA

April 2020

In a new case study from QMA, Devang Gambhirwala and Steve Brundage, CFA, compare the performance of our US Market Participation strategy (MPS, inception date 1/1/1992) to other defensive equity strategies across different time periods:

  1. The early coronavirus crisis (Feb 20-March 20)
  2. GFC and Tech Bubble
  3. In both up and down markets (over 5, 15 and 25-year timeframes)

MPS performs favorably in all cases. Some of the other strategies have outperformed at times during the time periods referenced above, but MPS has the lowest volatility and the best drawdown performance by far.

QMA’s Market Participation Strategy (MPS) was designed to participate in about 65% of the market upside with only about 30% of the downside of the S&P 500 Index. This combination of reduced maximum drawdown with significant upside capture has provided annualized returns in line with the S&P 500 Index over the long term – but with significantly less volatility.