Manifesto Level II — The Master Plan

Manifesto of the Epictetus private family fund with active management, Stoic Core, and Tudor hedge fund (Level II)

(General Development Plan for the Next 25 Years, 2026–2051)

Level II motto: "It doesn't matter how fast you go, what matters is that you don't step off the path."

1. The role of the Centaur and the "World XI" operating model

Capital management at Epictetus Fund is built on a symbiosis of human judgement and machine precision. This model shapes not only how decisions are made, but also how capital is allocated over the next 25+ years.

1.1. The Centaur: Manager + AI assistant

The Centaur is neither a person nor an algorithm, but an operating duet in which each side plays to its nature.

The AI assistant outperforms the human in maths, statistics, back‑testing and scenario sweeps. It runs stress tests, ingests reports, news and transcripts at scale, analyses charts, volatility and market regimes. It does not suffer from behavioural and emotional gaps, fatigue or cognitive bias. But it has no understanding of context beyond the data, no intuition and, crucially, no responsibility for the decision.

The Manager (the human) outperforms the machine in reading live sentiment and the texture of a given day. He has an intuitive feel for the tape, can filter noise through a philosophical lens and, critically, carries the will and responsibility for the final call. His weak spots are emotion, fatigue and behavioural errors (FOMO, loss aversion) — precisely what the AI is there to neutralise.

The operating principle: the AI does not replace the Manager's will; it is a tool for stripping out behavioural error and sharpening decisions within the framework of the Manifesto. The AI is the navigator: it provides data, options, probabilities. The Manager is the pilot: he takes the decision and bears the risk. The Centaur is not a player trying to outsmart the market, but a coach managing the squad.

1.2. Operating model: Stoic Core / Tudor

Fund capital is split into two functional blocks, each with its own purpose, horizon and level of activity.

Stoic Core (90% of capital) is the fund's main strategy. Its objective is long‑term, repeatable capital accumulation through the "World XI" architecture (30/30/40). The horizon is 25+ years (inter‑generational). The Centaur's role here is Architect: maintaining the target 30/30/40 mix, carrying out scheduled rebalancing and policing the selection criteria. The philosophy of this block is Stoic: process‑first, acceptance of market beta with light option overlay around 15‑delta, discipline and a refusal to play short‑term "beat the market" games.

Tudor (10% of capital) is the internal hedge fund. Its objective is tactical alpha, hedging systemic risks, testing hypotheses and market anomalies, and hunting for the next Microsoft. The horizon ranges from 1 day to 36 months (tactical). The Centaur's role here is Trader: actively managing exposure, using derivatives, long/short, intraday and swing strategies where appropriate. The philosophy is anti‑fragility: profiting from chaos and shielding the Stoic Core in periods of stress.

1.3. The Centaur's mission in this system

The Centaur's task is not to predict every "match" (trade), but to preserve the right team configuration. In practice this means:

1. Ensuring the Stoic Core (90%) remains the anchor of stability and is never exposed to Tudor's tactical risk.
2. Using Tudor (10%) as a testbed for new ideas and as protection in periods when the "World XI" suffers a drawdown.
3. Remembering that he himself is part of the system, not an external observer. His primary virtue is not to break the architecture under pressure from the moment.

The "World XI" model (Stoic Core + Tudor) is the base business model of Epictetus Fund for the next 25+ years. It is not re‑written in response to market noise; it evolves only through considered decisions of the Committee.

2. Purpose of the General Plan

The primary objective of the Plan is resilient growth of capital and investment income over a horizon of at least 25 years, with controlled risk and preservation of the owner's psychological resilience. The Plan is not designed to maximise returns in any given period, but to maximise the probability of reaching a substantial level of wealth by the end of the term, given the owner's real‑world needs and constraints.

As a performance reference point, the fund targets the return of a broad market index plus 1–6 percentage points of annual excess return, but only to the extent that prevailing market conditions allow this to be pursued without weakening core risk management or breaching agreed risk limits.

3. The 30/30/40 "World Team" Architecture

The strategic structure of Epictetus Fund's public‑markets capital is defined by a 30/30/40 allocation, reflecting a balance between market beta, selective alpha and defensive resilience. Any material deviation from this architecture, without a separate, reasoned decision of the Committee, is treated as a management error — not as a "bold call" or a moment of inspiration.

30% — System market engine (Beta Core)

A broadly diversified sleeve of liquid index instruments representing the most mature and resilient capital markets — the industry standard base that secures participation in long‑term economic growth.

Active overlay: this block is not passive. We systematically harvest additional return by selling covered calls on the underlying with c.0.15 delta, monetising volatility while retaining full upside to the strike and creating a buffer in sideways or moderately rising markets. The role of this block is to deliver reliable beta, enhanced by option premium, and to protect against the risk of "falling out of the market".

30% — Concentrated growth reserve (Alpha Pool)

A selective sleeve of high‑quality growth companies, passed through a multi‑step fundamental and qualitative filter. This is the bench of stars: businesses with proven models, durable competitive advantages and the potential to outperform the market by multiples over long horizons. The block is actively managed: positions are built on mispricing and rebalanced when the investment thesis breaks.

Active overlay: on roughly half of this sleeve we systematically sell covered calls, monetising elevated growth volatility, lowering average entry cost and generating incremental cash flow for reinvestment. The remaining half is left "clean" to avoid capping upside in cases of explosive re‑rating. The option‑selling programme is adapted to market regime and the individual volatility profile of each name.

40% — Organic Dividend Growth: stabilising cash flow (Defensive Anchor)

A diversified sleeve of assets with predictable cash flows, accumulated in favourable phases of the cycle. It includes companies with a record of organic dividend growth, selected income instruments and liquid reserves. The aim is to dampen portfolio volatility, provide an internal source of cash for rebalancing, and protect capital during market stress.

This exposure cannot be built overnight. It is the result of many years of systematic stock‑picking: c.120–150 positions accumulated at attractive points in each company's cycle, typically at P/E ≤ 20 with dividend growth of at least 6% per annum.

4. Discipline and hard limits

The Centaur operates under written limits on position size, leverage, concentration and permissible risk at both idea and portfolio level. The Manager has room for creativity within these boundaries, but no licence to step outside them.

Limits are defined in advance, in writing, and are not revised "on the fly" under pressure from markets or emotions. Any decision that increases a position beyond its stated limit, or draws on broker leverage to amplify a bet, is treated as a breach of discipline — even if it happens to make money.

Decisions taken "because it feels right", in a state of fatigue or in an attempt to "make it back", count as violations of hard discipline regardless of whether they produce profit or loss. Good luck earned while breaking rules is treated as a warning signal, not as success.

5. Approach to drawdowns

Drawdowns in both the Stoic Core and Tudor sleeves are accepted as the normal price of playing the "World Team" game and are not grounds for breaking the 30/30/40 architecture. For each bucket we define a "normal weather" corridor for drawdown and volatility; as long as the portfolio remains within that corridor, emotional reactions do not justify a change of strategy.

When the impulse arises to "speed up" recovery by taking more risk, the Centaur cuts risk and returns to the Plan, rather than increasing exposure. Any increase in aggressiveness during periods of stress requires a separate written rationale and is, by default, prohibited.

6. Term and horizon

This Master Plan for the development of Epictetus Fund is adopted as a strategic document for the next 25+ years, with an indicative horizon of 2026–2051 and beyond. The Plan assumes that specific instruments, tactics and venues may change, but the mental architecture and core principles do not.

Changes to the "World Team" architecture — the roles of the Stoic Core and the Tudor hedge‑fund sleeve, and the associated rules of discipline — are permitted only as deliberate evolution within the Plan, not as abandonment of it under pressure from transient market events. The existence of the Plan itself is not up for revision in response to drawdowns, news noise or swings in mood.