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Liquidating PAMM Portfolios: Tranquility & Hoi Polloi

Last updated on 2020-06-16

My experimental PAMM Portfolios JagzFX Tranquility and JagzFX Hoi Polloi have both been hammered by SARS-CoV-2 and show no signs of recovery. What can we learn from how these portfolios were affected?

As a quick recap, a PAMM Portfolio allows you to invest funds into multiple PAMM Accounts whilst keeping track of the performance of the overall portfolio. In earlier posts, I have tested different selection criteria, ways of filtering PAMM Account results, as an attempt to select successful portfolios, investing real funds such that real performance can be revealed.

Over-leveraged PAMM accounts simply blew up

Since Coronavirus struck the markets JagzFX Tranquility and Hoi Polloi are down about 29% and 48% respectively.

Tranquility Portfolio

The Tranquility portfolio was composed of fourteen accounts selected for their apparent stability over an extended period of time. Before the pandemic struck it was tracking small gain of about 2%. Four of the portfolio accounts went to zero, apparently blowing up on margin calls, and accounting for the majority of the 29% loss. The surviving PAMM accounts are a mixed bag: some profitable and some show an overall loss. Of the surviving profitable accounts, some show that they suffered large drawdowns and barely survived. However, there are three accounts that came through without showing any signs of over-leveraging. I’m proud to say that my own Vesperium PAMM is amongst these, partly because I ceased trading for a short period over the worst of the market moves, but mainly because it has sensible risk management. Below you can see how the leverage used on this account remains relatively constant over time.

Vesperium PAMM was not impacted by Coronavirus
Vesperium PAMM was not impacted by Coronavirus

Conversely, the graph below illustrates one on the accounts that blew up. Naming no names, but this account advertised itself as not using grid or martingale strategies. That is maybe true, but it’s also clear that it did not use any risk management either. See how the leveraged spiked way past the margin call?

Example of blown over-leveraged PAMM Account
Example of blown over-leveraged PAMM Account

Hoi Polloi Portfolio

The selection criteria for Hoi Polloi involved following the herd and investing in some of the most popular PAMM accounts. I didn’t expect any fantastic results from this, as experience has taught me that a contrarian approach is generally more successful, especially in retail trading. Three of the accounts in this portfolio blew up, and a further account was closed by the manager after losing almost 40%. Of the remaining accounts only three remain in profit, one of which shows that it suffered a large draw-down event. Two accounts came through apparently demonstrating good risk management. I didn’t have any of my own accounts in this portfolio, none of them are popular enough!

Digging through the rubble

Whilst the pandemic has been a disaster on many levels, in both human as well as economic terms, it has gifted is some useful information. The economic shock has left a fingerprint that can now be used to examine the true risk management of surviving PAMM accounts. I’ve liquidated these portfolios, and I will be digging through the rubble to find anything worth salvaging: any PAMM accounts worthy of investing?

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