At the request of some readers I publish here the simulation results on the XIV portfolio using back simulated price data downloaded from us.spindices.com.
The simulation covers the time interval from March 2006 to June 2015. We compare the following two portfolios:
 Basic Portfolio: MDY, QQQ, SHY, TLT.
 XIV Portfolio: MDY, QQQ, SHY, TLT, XIV.
In table 1 we show the optimization results by maximizing returns without any constraints on volatility. The equity curves are given in figure 1.
Table 1. Performance of portfolios optimized for maximum achievable returns without constraints on volatility.
TotRet% 
CAGR% 
maxDD% 
VOL% 
Sharpe 
Sortino 

Basic Portfolio 
418.57 
19.45 
17.94 
16.68 
1.12 
1.64 
XIV Portfolio 
3,735.45 
48.25 
52.97 
44.91 
1.07 
1.17 
Figure 1. Equity curves of portfolios optimized for maximum achievable returns without constraints on volatility.
Source: This chart is based on calculations using the adjusted daily closing share prices of securities.
We see that the XIV portfolio was capable of returning a compound annual return of 48.25%, more than double than the return of the basic portfolio of 19.45%. The maximum drawdown of the XIV portfolio was 52.97% slightly less than the SPY drawdown of 55.18%. Also, the volatility of the XIV portfolio is almost three times larger than the volatility of the basic portfolio. Clearly, the XIV portfolio would have returned a huge 3,735% gain over a ten year period.
Only very aggressive investors would try to achieve maximum returns, regardless of how large the volatility is. For that reason, we simulated the portfolio with a target annual volatility of 12%.
The results are shown in table 2 and figure 2.
Table 2 Performance of portfolios optimized for maximum returns with a target of 12% annual volatility.
TotRet% 
CAGR% 
maxDD% 
VOL% 
Sharpe 
Sortino 

Basic Portfolio 
240.57 
14.15 
13.3 
12.02 
1.18 
1.59 
XIV Portfolio 
280.04 
15.51 
13.6 
12.01 
1.29 
1.55 
Figure 2. Equity curves of portfolios optimized for maximum returns with a target of 12% annual volatility.
Source: This chart is based on calculations using the adjusted daily closing share prices of securities.
There is no clear winner if one considers the whole history of the equity curves. Based on the final results as on June 30, 2015, the XIV portfolio outperformed by a cumulative return of 40% over the ten year period.
Disclosure: I am/we are long QQQ,SHY.