Category: Alternative Investment Strategy

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Alternative Investment Strategy

Time Series or Cross Sectional Momentum – Which is Better? Your Choice May Matter

The marketplace is abuzz with the value of momentum trading, but a closer inspection shows that it is packaged in two major strains, time series and cross-sectional momentum. The traditional trend-following CTA focuses on time series momentum while the most of the equity research and implementation is conducted through the cross-sectional approach. There is similarity between these approaches, but there are also enough differences so that the return profile for each will not be the same. 

Alternative Investment Strategy Managed Futures

Back to Basics on Managed Futures with AIMA – Answering the Question for Why This Strategy Should be Held

There are many works on managed futures that explain the basics of this hedge fund strategy, but the characteristics need to be reinforced especially at current times when the strategy is underperforming other hedge fund strategies. The core reason for holding managed futures is that it provides useful diversification. This diversification is not available from other strategies and this diversification will be especially present during ‘bad times” of a equity decline. Don’t forget that those strategies that have more systematic risk will need to generate higher returns. Investors will be paid to hold them. On the flip-side, there will be a “payment” for managed futures which does well in “bad times”.

Alternative Investment Strategy

Can Momentum and Diversifications Solve Every Investment Problem?

I listened to a number of presentations concerning crisis alpha and crisis offset at a recent hedge fund conference. The idea of holding assets and strategies that will do well in “bad times” is a critical issue for any portfolio construction discussion. It is the bedrock and foundation of any portfolio that attempts to protect against bad states of nature, control risk, and gain during good times.

Alternative Investment Strategy

Momentum as the Big Embarrassment to Market Efficiency

“Momentum is a big embarrassment for market efficiency,” he proclaimed, saying he “hopes it goes away” and that the concept was “not exploitable.” – Eugene Fama from CFA Society of Chicago keynote speech.

Alternative Investment Strategy Managed Futures

Declining Economic Growth and Managed Futures Strategy Returns – Is Something There?

Another simple test to determine whether managed futures returns will do better than average is through looking at economic growth. Now, we know that bonds and other defensive assets like managed futures will do better in “bad times” such as a recession, but there just are not many recessions. The cost of being defensive can be very high if you have to pay for downside protection through either explicit insurance or through holding assets that have a lower expected return.

Alternative Investment Strategy Managed Futures Education

Mitigating Losses with an Absolute Return Strategy

Absolute return strategies aim to generate positive returns irrespective of market direction. A truer more apt definition is that absolute return, or active investment management, seeks at all times to minimize losses. We mentioned this as a core attribute of an absolute return strategy in “Why an Absolute Return Strategy”, but this simple concept is worth further description.

Alternative Investment Strategy Commodity Trading Advisor Managed Futures Education

Why an Absolute Return Strategy

The first goal of investing is to increase wealth or said differently, to increase purchasing power. Warren Buffet is quoted as saying “Rule number 1 of investing is never lose money. Rule number 2 is never forget rule number 1.” The hidden message in these seemingly obvious statements is that building wealth depends much more on preventing large losses than it does on achieving large gains.

Alternative Investment Strategy Managed Futures Education

Advantages & Disadvantages of Call Options for Hedgers & Speculators

Buying (Long) a Call Option: A basic option strategy to be familiar with and learn the advantages and disadvantages of is buying a Call Option (Long Call).  Buying a call option is the opposite of buying a put option, in that a buying a call gives you the right, but not the obligation to buy […]

Alternative Investment Strategy Managed Futures Education

Tips on Put Options for Farmers and Hedgers

Buying (Long) a Put Option:A basic option strategy to be familiar with and learn the advantages and disadvantages of is Buying a Put Option (Long Put).  Buying a Put option is the opposite of buying a call option, in that a Put gives you the right, but not the obligation to sell the underlying futures contract at a specific […]

Alternative Investment Strategy

Money Management & Contrary Opinion Trading

Contrary-opinion trading is perhaps the best solution to market madness and also noise in the markets; it is a “thinking-man’s” trading tool.  A Contrarian is defined as:  a person who takes an opposing view, especially one who rejects the majority opinion, as in economic matters. In a nutshell if a CTA / Money Manager is […]

Alternative Investment Strategy CTA Managed Futures

Madison Park Capital Management – Strategy Philosophy

As our marketing efforts gradually shift from focusing on individuals to institutions, we have been asked recently, more than once, to provide a theoretical framework for our investment philosophy and trading approach. Although our trading results continue to validate our strategy, we were more than happy to take on this challenge, go back to review the genesis of our ideas from over a decade ago and review why our methodology still stands to reason.

Alternative Investment Strategy Volatility

High vs. low volatility strategies: A different view of risk

When investors think of risk, they usually associate it with volatility. This probably stems from Nobel Prize winning economist Harry Markowitz’s use of volatility in the 1950s and fellow Nobel Prize winner William Sharpe’s use of volatility in creating his self-named method of risk adjusting returns. The lower the volatility of a given investment theoretically indicates that investment carries less risk. Risk, however, could be viewed from a different angle. The impact of a high volatility investment on a portfolio can be mitigated by the allocation size given to that product. By normalizing for volatility, theoretically, high and low volatility investments can have equal impact on a portfolio’s total return. This leads us to a different way to view risk. Risk is the difference between the anticipated worst loss and the realized worst loss.

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