Tag: trend following
Quantica Quarterly Insights – Why speed matters
The second half of Q1 2020 turned out to be one of the most volatile periods ever for financial markets. The intensity and speed of the equity market sell-off has been unprecedented and market volatility has reached higher levels than during the peak of the financial crisis in 2008. The design of systematic trend-following programs involves many different building blocks, such as signal generation models, the structure of the investment universe, risk allocation targets between different asset classes, risk management models and portfolio construction methodology.
What We Look for with Trend-Following Beta – A Simple Set of Rules
Trend-following, as applied to managed futures, has been around for decades. Yet, there is no universal agreement on what is or should be a trend-following benchmark that can serve as the strategy beta or as a trend-following strategy factor. A trend-following benchmark can be used to measure the factor-beta of any manager. I can be […]
Managed Futures is not Trend-Following but it is Close – Broadening the Product Spectrum has Added Strategy Complexity
I would not be the first person to engage in the lazy thinking that managed futures are synonymous with trend-following. For many years, there was little wrong with using both terms to mean the same thing. The majority of managed futures are still trend-following.
Back to Basics for Trend-Following – It is All About What It Does to the Portfolio
It does matter what an investment strategy will do on a stand-alone basis; however, it really matters what an investment will do when added to an already diversified portfolio. For any strategy allocation decision, it is all about the marginal contribution to portfolio return and risk. Most investors know this intuitively, but they often do not focus on the marginal portfolio contribution in practice.
Trend-Following – A Century of Data Suggests There Is Value
Consistency is critical for any investment style or factor, and it seems that trend-following seems to show it better than most other alternative strategies. It is now almost amusing that when efficient markets ran supreme as the paradigm of choice for market behavior no one was able to find these results, but now that there […]
To Adjust or Not Adjust Volatility for Momentum Strategies
Risk management has taken the money management business by storm. If you run money, you have to say that you control volatility and manage the risk. It is the equivalent of saying, “I love my mother and apple pie.” If risk goes up, you have to cut position exposure or at least that is what many will say is the path to good returns. Nevertheless, the empirical testing of this truism could be improved. A recent paper in the Journal of Alternative Investments called, “Volatility Weighting Applied to Momentum Strategies” looks at this important question in detail and concludes that it does help at improving the return to risk.
Machiavelli Could Have Been a Trend-Follower
Whoever wishes to foresee the future must consult the past; for human events ever resemble those of preceding times. This arises from the fact that they are produced by men who have been, and ever will be, animated by the same passions. The result is that the same problems always exist in every era.
– Niccolo Machiavelli
August Calm Gives Way to Limited Opportunities for Managed Futures
September came and went with a relative whimper. It was our view that various key macro events scheduled throughout the month coupled with uncertainty over monetary policy, had the potential to produce significant moves across global markets. As it turned out..with the exception of the commodities sector…this was not the case. U.S. equities ended the […]
Was August the Calm Before the Storm?
Historically the summer markets coincide with tight ranges and low volume. Trends seem to dry up, markets trade in tight ranges, and short-term opportunities can be rare. For instance, the past 30-day range in the SP 500 has been the tightest range since 1995. That particular market led to a 180% rally in the stock market over the […]
Managed Futures Prospers from BREXIT Blues
The IASG Trend-Following Strategy Index posted an estimated net return of +4.59% for June. The dominant theme in June was the UK referendum on EU membership, or ‘Brexit’ and the attendant surge in volatility that resulted in positive performance for CTAs. Trading conditions for systematic diversified managers were conducive due in large part to an […]
Alternatives to Long Only Passive Strategies
As we discussed in “Why an Absolute Return Strategy”, most investors, knowingly or not, rely on long-only passive strategies. These investors may shift between stocks, bonds and cash at various intervals, but generally their portfolio returns mimic those of well-known stock and bond indices. Alternatively, active or absolute return investors rely on many different strategies that are not dependent upon a positive market direction to generate positive returns. To continually build wealth through good and bad markets, absolute return investors require a diverse, alternative set of strategic tools. This article describes a number of strategies used by absolute return investors to help them achieve their goals.
July Results showing good month for Managed Futures
The IASG CTA Index has approximately 75% of managers updated through July performance with almost all sectors posting positive returns for the month. The one exception is the agricultural index where many managers struggled with grain pricing continuing downward pricing and many with expectations that there would be a bounce back in grains.
IASG May 2015 Performance Results
We have now reached the end of June 2015 and have compiled nearly 100% of the manager data for May 2014. With five months of performance on record, the IASG CTA Index has turned negative YTD (Past Performance not indicative of future results). We anticipate this trend to hold for the remainder of the month as investors […]