HFEA (Hedgefundie's Excellent Adventure)

HFEA explained: the 55% UPRO and 45% TMF leveraged risk parity portfolio, its stock-bond thesis, backtests, what happened in 2022, and its variants.

Education only, not advice. Leveraged and strategy-driven investing can lose most of its value quickly. Figures are historical or backtested and do not predict future results.

The idea

HFEA is leveraged risk parity. Stocks and long-term Treasuries have often moved in opposite directions during crises, so holding both, each with 3x leverage, aimed to capture stock-like growth with smoother swings. The author, "Hedgefundie", first proposed 40/60 and settled on 55% UPRO and 45% TMF, rebalanced quarterly.

The thesis

On days the S&P 500 fell 2% or more, long Treasuries historically rose about 75% of the time. A similar approach had run for years in PIMCO's StocksPLUS Long Duration fund (PSLDX).

Backtest

Simulations from 1987 to 2018 showed about 19 to 24% a year, and about 11% a year through the 2000 to 2011 "lost decade" for stocks. These used rebuilt returns before the funds existed, in a period when interest rates fell almost continuously.

What happened

The portfolio was up about 150% at its January 2022 peak. In 2022, inflation drove stocks and bonds down together, and HFEA fell about 65%. By April 2025 it was still below its peak. Hedgefundie had written that he could not think of a real-world scenario in which both legs fell together for long.

Costs

The swaps inside UPRO and TMF cost roughly 3.8% and 2.9% a year in 2023, on top of expense ratios. Borrowing costs rise with rates.

Variants

EDV instead of TMF for tax efficiency; monthly or threshold rebalancing; and "HFEA The Resurrection", which uses SPY's 200-day and TLT's 400-day averages to pick one of four regimes, holding TMV in high inflation.

Risks

  • Stock-bond correlation can flip, as in 2022.
  • Long-duration bonds are very sensitive to rates.
  • Both legs suffer Volatility decay.
  • Hedgefundie used it for about 15% of his net worth: a satellite, not a core.

See also

  • Leveraged ETFs explained How leveraged ETFs like TQQQ and UPRO work, why they reset daily, how volatility decay erodes them, and what their historical drawdowns look like.
  • Leveraged strategies compared A side-by-side comparison of six leveraged ETF strategies, 3 Sig, 6 Sig, 9 Sig, TQQQ FTLT, Holy Grail and HFEA, by holdings, signals, results and risk.
  • Maximum drawdown What maximum drawdown is, how to calculate it, why losses need bigger gains to recover, and historical drawdowns for stocks and leveraged funds.

Pages that link here: Managed futures

Last updated September 30, 2026. Education only, not investment advice.