Even a broadly diversified portfolio like GLI will from time to time underperform a single index benchmark, as was the case in 2015 when the portfolio was impacted due to a halving of the oil price and weakness in the euro. However, the strategy was maintained. In 2016 and 2017 performance has staged a more than solid recovery, beating global markets significantly.
In 2008, GLI fell in value with all markets when money market rates surged amid a global liquidity crisis, yet it still outperformed its benchmark very significantly (net -13.8% vs. – 37.6%). The GLI fund remained liquid throughout the crisis and there was never any need to consider “gating the fund”. Even during this period, no investor withdrew assets due to performance reasons, while two investors liquidated limited positions with GLI to plug liquidity shortages in other portfolios not related to GLI. At this time, Coburn Barrett was convinced central banks would flood the market with cash so it raised GLI’s exposure to falling interest rates. It used volatility futures to hedge its position, retrieving its losses, and more, during 2009.
Coburn Barrett estimates that the GLI Fund will outperform the S&P 500, the MSCI World, or similar indices in two out of three years over the long run. This is borne out in its long track record as well as by back testing with market data and simulations prior to inception.