# FIN-4 — every gate asks "is this real?" and none asks "is this better than the free version?": the benchmark is SPY, and no criterion anywhere requires beating a passive momentum ETF

status: open · raised 2026-09-10 (external financial review F5, confirmed — see `research/2026-09-09_financial_review_verification.md`) · class: decision relevance · judgement: **YES — highest value per unit of effort in the review** · effort ~0.5 pd · horizon: before December; a NO here is a permanent cheap NO

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**Plain-language summary.** For a 12-2 momentum book on the Russell 1000,
"does it beat SPY, beta-adjusted" is a question with a thirty-year published
answer that says nothing about whether THIS implementation is worth running.
The decision-relevant question is whether it beats **MTUM** — an ETF that
harvests the same factor for 0.15%/yr with no cron, no reconciliation, no
broker state, and no leak risk. As written, the project could clear every gate
it has and still be strictly dominated by a one-line ETF purchase, and nothing
in the harness would say so.

## Ground truth

- `grep -rI "MTUM"` returns nothing in the repository except one 2026-05-29 AFK
  transcript. It has never been a benchmark.
- `config/settings.yaml:117` and `:303`: `benchmark: "SPY"`.
- `backtest/metrics.py` computes beta, Jensen's alpha, information ratio and
  capture ratios — all against that benchmark.
- The SHIP gate (CLAUDE.md) is walk-forward Sharpe, PBO, IS-OOS correlation,
  survivorship-free confirmation, per-window regression, DSR. No factor-relative
  criterion at any step.

## Fix shape (propose-only)

Add a momentum proxy as a SECOND benchmark (MTUM, or a long-only momentum index
series if a fund proxy is unacceptable for licensing), report factor-relative
metrics beside the SPY ones, and propose adding *"beats the passive factor
proxy net of costs"* to the SHIP gate. **The SHIP-gate amendment is an owner
decision and this row does not presume it** — the build may produce the
measurement and the proposed wording; adopting it into the gate is a separate
approval.

## Why it is worth doing even though it may say NO

A NO is the valuable outcome: it is a cheap, permanent, correctly-registered
"this specific thing is dominated" — the A3-pattern result NORTHSTAR §1 counts
as an asset rather than a loss. It costs half a day and closes a question that
would otherwise sit open through every future gate.

## Test design + negative control

Factor-relative metrics computed over the frozen window must reproduce the
known SPY-relative numbers when the benchmark is set back to SPY. **Negative
control:** point the "momentum proxy" at SPY and assert the factor-relative
panel becomes identical to the existing one — a benchmark parameter that is
ignored is the usual way this kind of build fools itself.

## Kill criterion (pre-registered)

If MTUM history cannot be obtained on the frozen-store terms this project uses
(owned, acquire-once, no standing vendor dependency), the row drops to a
long-only momentum index series; if neither is obtainable, it dies and records
that the comparison is unavailable rather than substituting a proxy silently.