Research6 min
The Button That Shows Reality
The StratQ home page opens on a Returns chart of portfolios.
Switching to a 5Y perspective, most of the reconstructed portfolios made money. Which sounds impressive!
But did these strategies truly beat the market, or was their success just an illusion?
Switch the view from Return to vs SPY, and the picture suddenly changes.
The chart demonstrates the importance of noting the difference between making money and adding value relative to the market.
Quick glossary
Before reading the figures, a few terms matter:
- Return How much the reconstructed portfolio gained or lost over the selected period.
- SPY The S&P 500 ETF used here as the market benchmark.
- Excess return The portfolio’s return minus SPY’s return over the same period. A positive number means the portfolio beat SPY; a negative number means it lagged.
- Beat rate The share of priced portfolios that finished ahead of SPY.
- Advance rate The share of portfolios with a positive raw return.
- Median The middle result after every portfolio is ranked from lowest to highest.
- Rank curve A chart that arranges portfolios from worst to best. The x-axis represents rank, not time.
- Partial coverage A portfolio for which only part of the disclosed equity weight could be priced.
The two plots
These two charts use the same five-year period and the same underlying set of reconstructed portfolios. What changes is the success criteria.
The Return view shows whether the portfolio make money.
The vs SPY view shows whether the portfolio beat the market benchmark.
This distinction changes the interpretation completely.
In the five-year Return view, the median reconstructed portfolio gained about +60%, and roughly 91% of priced portfolios finished above zero.
At first glance, that looks like broad success.
But SPY gained about +82% over the same period.
Press vs SPY, and the median result becomes roughly −24% relative to SPY. Only 20% of the reconstructed portfolios finished ahead of the benchmark.
So what does this mean?
Well ... most would have been better off, simply keeping pace with SPY.
This button is essential for defining the benchmark against which success is judged.
How to read the figures
1. The x-axis as rank
This is a sorted rank curve.
Every priced portfolio is arranged from the worst-performing result on the left to the best-performing result on the right.
Moving across the chart moves through the population of portfolios.
The horizontal position tells you where a portfolio ranks relative to the others.
2. What zero means
The meaning of the zero line changes with the selected view.
On Return, zero separates portfolios that made money from those that lost money.
Above zero means a positive return. Below zero means a negative return. SPY appears separately as a dashed benchmark line.
On vs SPY, the benchmark becomes zero itself.
A portfolio above zero beat SPY. A portfolio below zero lagged SPY.
The chart now presents whether they added return beyond the benchmark.
3. Where red becomes green
The red-to-green crossing shows how much of the population “won” under the selected definition of success.
On Return, that crossing appears near the far left because roughly 91% of the five-year portfolios produced positive returns.
Switch to vs SPY, and the crossing moves deep into the chart.
Now only 20% are on the winning side.
4. Use the right rail to confirm the curve
The figures on the right-hand side present the same facts numerically.
In the five-year Return view, the rail shows roughly:
- +60% median return
- +82% for SPY
- 91% advancers
In the five-year vs SPY view, the emphasis changes roughly to:
- −24% median excess return
- 20% beating SPY
5. Check coverage
At five years, the panel contains 2,265 priced portfolios:
- 1,312 with full coverage
- 953 with partial coverage
The footer is therefore not fine print to ignore.
These figures are StratQ’s calculations over reconstructed 13F holdings.
How the numbers are calculated
The figures on this board are reconstructions, not the managers’ reported portfolio returns.
Each reconstructed portfolio starts with the holdings disclosed in the filer’s most recent 13F. Those positions are priced forward from the filing date, while the reported portfolio weights are held where the filing left them.
Trades made between filings are invisible. So are cash, bonds, short positions, foreign-listed securities, and anything else outside US-listed long equities. Fees are not included either.
The reconstruction therefore shows what happened to the disclosed long-equity slice of the portfolio, not necessarily what happened to the manager’s entire investment portfolio.
| Window | Median return | Advance rate | Median vs SPY | Beat rate |
|---|---|---|---|---|
| 1D | −0.32% | 27% · 637/2,338 | −0.09% | 42% · 991/2,338 |
| 1M | +2.57% | 79% · 1,878/2,367 | −1.28% | 29% · 694/2,367 |
| YTD | +12.47% | 90% · 2,119/2,364 | −0.95% | 43% · 1,007/2,364 |
| 1Y | +17.90% | 90% · 2,117/2,362 | −1.97% | 39% · 911/2,362 |
| 3Y | +63.62% | 95% · 2,218/2,323 | −16.74% | 25% · 584/2,323 |
| 5Y | +59.08% | 91% · 2,055/2,265 | −23.74% | 20% · 460/2,265 |
The easy mistake
“Made money” is not the same statement as “added value”
A positive return can look like evidence of a manager’s skill.
But when the market itself is rising, part of that return may simply come from being exposed to the same environment lifting most long portfolios.
The five-year result makes the distinction difficult to ignore.
So most portfolios made money while still falling behind the benchmark.
Return tells you what happened. Excess return tells you what was added relative to the reference.
Top movers on the home board
The band below the hero chart ranks the day’s biggest movers by one-session raw return. But inside each card, the small line chart shows something different: the portfolio’s 30-session performance relative to SPY.
These are important to pay attention to.
Carlyle Group Inc. for example, appears under ADVANCERS at +1.34% for the session, yet its 30-session line is red. It had a positive day, but over the longer comparison window it still trailed SPY.
Donor Advised Charitable Giving appears under DECLINERS at −4.52%, while its 30-session line is green. It had a bad day, but over the previous 30 sessions it had still outperformed SPY.
The cards expose the same problem as the return toggle, only at a smaller scale.
The leaderboard is ranked using one-day raw return, while the evidence inside each card reflects a longer, benchmark-relative result.
A portfolio can therefore look like a winner by one measure and a loser by another.
Apply the method
Before buying into any performance claim, answer the two critical questions:
What is the metric?
What is the comparative benchmark?
For a fund, compare its return with an investable benchmark over the same horizon.
For an analyst’s hit rate, compare the calls with the market’s underlying base rate during the same period.
For a strategy backtest, separate returns shared with the broader market from returns attributable to the strategy itself.
For a leaderboard, check whether positions are ranked by raw movement or by performance relative to a benchmark.
And for any reconstructed portfolio, inspect the coverage before treating the result as precise.
The principle is simple:
“It went up” gives information about the direction.
“It added value” requires a comparison.