Incubator • Friends & Family

First-Loss Alignment. Simple Rules. Data-Driven.

Baseline objective: match the S&P 500 (or your composite) using a 30% Options Sleeve + 70% Treasuries—then deploy extra cash on drawdowns to amplify recoveries. Founder contributes $1,000,000 first-loss capital. No mgmt fee. Transparent hurdle & carry.

Starting Capital & Roles

No leverage by default. Starting NAV = GP $1,000,000 + LP amount you set below.

Why Invest (Friends & Family)

Alignment

Founder’s $1M first-loss covers the first 10% annual loss (until exhausted). GP suffers before LPs do.

Conservative Base

~70% in cash/USTs at configurable APR (default 4%). Compounds while waiting for opportunities.

Systematic & Transparent

Clear rules deploy cash on benchmark drawdowns; fully inspectable backtest + simulator.

Options Expertise

30% Options Sleeve tuned so 30/70 ≈ benchmark at baseline; downside-aware convexity.

No Mgmt Fee

Only 25% carry on profits above a 7% LP hurdle; high-water mark.

Clear Reporting

Equity curve with axis labels, drawdown, allocations, yearly collapsible results, fills table.

Strategy Overview (30/70)

Baseline: Track the Market with 30/70

The Options Sleeve is calibrated so 30% options + 70% T-Bills approximates the chosen benchmark’s return on average (before any dip-buys). That keeps most capital in Treasuries while matching market drift.

When the benchmark falls from its rolling ATH by d%, the cumulative target deployed from cash equals d% of the original 70% cash. Deploy only when crossing new thresholds (e.g., 10/20/30/40/50%); hold through recovery.

Parametric Options Model

Ropt = α + β · Rmkt + γ · min(0, Rmkt) (monthly).

  • α (premium drift), default 0.004/month
  • γ (downside convexity), default −0.15
  • β auto-fit in “Match Benchmark” mode to minimize 30/70 tracking error.

Backtest & Simulator

Offline, monthly step. Defaults include synthetic but regime-realistic monthly series for SPY, QQQ, IWM, TLT (2000–2024). Upload CSV to override.

Inputs

Deploy from Treasuries to benchmark equity at deeper drawdowns.
β auto-fits if “Match Benchmark” is ON.
On phones: swipe the legends to scroll; tap a legend chip to toggle a line.
Equity Curve
Strategy NAV Benchmark (100%) Options Sleeve S&P 7% S&P 10% S&P 12% S&P 15%
Underwater Drawdown
Strategy DD Benchmark DD
Allocation Timeline
Cash/Treasury Benchmark Equity Options Sleeve

Performance Metrics

Buy-the-Dip Fills

DateDrawdown%Deployed ($)Cumulative ($)

Results by Year (tap to expand)

Forward Simulation (from latest backtest state)

Future Paths (median)
Strategy median Benchmark median Selected S&P lines

Terminal Values & CAGRs

Percentiles

PercentileStrategy (×Start)Benchmark (×Start)

Fees & First-Loss Economics

Waterfall (Annual)

  • First-Loss: First 10% annual loss on HWM NAV is absorbed by GP’s $1M (until exhausted).
  • No Management Fee
  • Performance Fee: 25% of profits above a 7% LP hurdle, with high-water mark.
Calculator

Examples

  1. Down 8%: GP absorbs entirely; LPs flat; no fees.
  2. Up 6%: Below 7% hurdle; no fees.
  3. Up 18%: First 7% to LPs; remaining 11% × 25% = 2.75% fee; remainder to LPs. HWM updated.

Risks & What Could Go Wrong

  • No deep pullbacks: Strategy may lag in straight-line bull markets if thresholds never trigger.
  • Prolonged bears: After final threshold, dry powder is spent; you ride the cycle until recovery.
  • Options sleeve model risk: α/β/γ mis-specification or volatility spikes can hurt at the wrong time.
  • Execution/slippage: Real-world frictions around rebalancing and fills in stressed markets.
  • Leverage (if enabled): Amplifies both gains and losses; default is OFF.

Call to Action

Interested? Friends & Family LPs can request materials and a walkthrough.

[Placeholders] Email • Phone • Office (Central Florida)

Methodology (Formulas & Notes)

Time step: monthly. Treasury monthly rate rm = (1+APR)^(1/12) − 1.

Composite: weighted sum of selected tickers’ monthly returns; rolling ATH & drawdown DD = 1 − Index/ATH.

Buy-the-dip: when DD crosses threshold T, cumulative equity target equals T% of original cash (70% of start NAV). Invest additional to reach that target; hold through recovery.

Options model: monthly Ropt=α+βRmkt+γ·min(0,Rmkt). “Match Benchmark” solves β by least-squares minimizing 0.7·rrf+0.3·Ropt − Rmkt over the backtest range (no DIP flows).

Rebalance: if ON, set Options to 30% of current NAV at month-end (cash ↔ options).

Metrics: CAGR, vol (σa=σm√12), Sharpe=(CAGR−APR)/σa, Sortino uses downside σ vs rf, MaxDD over NAV, Ulcer=RMS(drawdowns). Upside/Downside capture vs composite.

Forward sim: Bootstrap (sample monthly returns) or GBM with μ/σ from composite. Scenario paths. S&P lines use deterministic CAGR (7/10/12/15%).

Fees/HWM: Annual. First 10% loss absorbed by GP first-loss. 25% carry on profits above 7% hurdle, HWM gates fees to only new net profits.