2025 Performance Review: The Discipline of Quantitative Frameworks

Every year, the market delivers a new storyline or market narrative that fuels the media, social media, and “experts.” And every year, the biggest risk for long-term investors isn’t the story itself. It’s the behavior it triggers.

As we review the performance of our Classic and Smart ETF model portfolios in 2025, it’s tempting to focus on the double-digit returns delivered by many of them. But 2025 was also a year of sharp mood swings and rapid-fire headlines: from the “Liberation Day” tariff announcements in April to the record-breaking government shutdown in the fall. In that kind of environment, one year of performance is just a snapshot.

Our goal at Quantlake remains the same: provide a structured framework that helps investors look past the noise.

The Real Risk in 2025 Was Behavioral

The biggest risk in 2025 wasn’t market volatility. It was how investors responded to it.

When the “DeepSeek” shock hit AI stocks in January, or when markets tumbled in early April, the impulse to panic-sell was high. Conversely, the “everything rally” that followed the Federal Reserve’s pivot toward rate cuts often triggered performance chasing.

These reflexes are human. They’re also costly.

That’s where a quantitative approach earns its place. It acts as an emotional circuit breaker, replacing impulse decisions with rules. Aligning your risk tolerance (how much volatility you can emotionally withstand) with your risk capacity (how much loss you can absorb without derailing your plan) is more important than reacting to headlines.

What Does “Risk-Adjusted” Really Mean?

Risk-adjusted return is not just about how much a portfolio returned. It’s about how efficiently it delivered that return.

Think of it as a smooth ride compared to a roller coaster. Two portfolios might land in the same place, but one could have been far easier to stay invested in.

We measure this using:

Sharpe Ratio (1Y): return per unit of total volatility

Sortino Ratio (1Y): return per unit of downside volatility

Classic Portfolios

Our Classic portfolios rely on time-tested asset allocation principles, from fixed-income stability to equity-centric growth. They use fixed weights and rebalance quarterly.

What Stood Out in 2025

Example of strong performance, and the risk cost behind it:

Our Global Buffett-Inspired model returned a strong 20.64%, but its -46% historical drawdown is a reminder that standout returns often come with deep valleys.

Example where risk-adjusted results beat raw returns:

The Conservative portfolio returned a more modest 11.98%, but posted a superior Sharpe of 1.23. This shows that smoother paths can lead to better investor outcomes.

What 2025 Taught Us in the Classic Set

Risk buckets exist for a reason. The higher you go, the more the path matters. And the path is what investors often struggle to live through.

Conservative to Moderately Conservative: Returns were relatively tight (around 12–15%), and risk-adjusted metrics stayed strong. This is often dismissed as “boring” until investors realize boredom helps them stay invested.

Moderate: Results ranged widely (9.72% to 18.70%). This is where behavioral mistakes begin. Investors focus on last year’s winner, forgetting that next year’s leaderboard will look different.

Two comparisons that illustrate the point:

Strong return, clear risk cost:

US Buffett-Inspired returned 16.45%, but with a -50% max drawdown. Holding it through stress takes more discipline than most expect.

Risk-adjusted strength, despite lower return:

Conservative posted “only” 11.98%, yet had the best Sharpe (1.23) and smallest historical drawdown (-16%) in the Classic group.

Portfolios are not a scoreboard. They’re a behavioral contract with yourself.

Smart Portfolios

Our Smart models use more advanced techniques, including regime-aware constraints and tactical rotation. They are reviewed monthly, and rebalancing is triggered by market and macro conditions.

What Stood Out in 2025

Example of high return, and the risk that came with it:

US Leverage Growth returned 22.29%, powered by the year-end rally in tech. But its -51% historical drawdown is a price tag that many investors fail to account for.

Example where discipline beats return-chasing:

Enhanced Markowitz delivered 16.40%, paired with a strong Sortino of 1.47. This reflects quality return delivery in a shifting market regime.

What 2025 Taught Us in the Smart Set

Smart portfolios reveal something essential:

Process doesn’t eliminate uncertainty. It structures it.

The goal isn’t to be right every month. It’s to stay systematic when markets shift.

Within-bucket examples:

Conservative (Smart):

Bogle+ (13.65%) outperformed Target Volatility (10.39%), and posted stronger risk-adjusted metrics (Sharpe 0.64 vs. 0.47).

Moderately Conservative (Smart):

Enhanced Markowitz stood out with 16.40% and the strongest risk-adjusted profile (Sharpe 1.11, Sortino 1.47).

Moderate (Smart):

A wide range (10.51% to 19.56%). Leadership rotated often, and diversification came with a timing cost. This is where investors are most likely to misjudge short-term outcomes.

Conclusion: What Matters Most Isn’t Only the Return 

Past performance isn’t predictive. Markets change. Correlations shift. And risk usually appears when it’s least expected.

The best portfolio isn’t the one that topped the charts in 2025. It’s the one you can stick with in 2026, 2027, and beyond.

The biggest driver of long-term results isn’t whether you picked the top performer this year.

It’s whether you stayed invested when your portfolio became more erratic.

The market will always give you reasons to second-guess your plan. That’s not a flaw. It’s the tuition.

At Quantlake, we’re here to help you stay invested with clarity, discipline, and data, not drama.

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Happy Long-Term Investing!

Romain Gandon, CEO & Founder of Quantlake
🔗 LinkedIn

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Footnotes & Disclosure

Past performance is not indicative of future results. Markets evolve, correlations change, and risk tends to appear when it feels least convenient.

CAGR: Compound Annual Growth Rate.

Risk Warning: This article is for informational purposes only and not financial advice. Consult a qualified professional for investment decisions. Results reflect model performance; actual results will differ based on individual circumstances, including costs and taxes.

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