This paper addresses issues contributing to the underperformance of trend following programs during the investment environment of the past five years, a set of conditions that may continue for some time. As the “trend following” debate rages on, our ultimate concern pertaining to the current conundrum is whether trend following strategies are no longer profitable. While I review comments from a variety of leaders in the field, both data and comments focus more heavily on the CTA (Commodity Trading Advisor) space than on that of other fund managers. Nevertheless, details are applicable to a variety of strategies. It is my hope that a broader perspective will encourage investors to ask more pragmatic questions, ultimately improving their manager selection process.
Dr. John Lintner, a Harvard Professor, presented the seminal paper entitled “The Potential Role of Managed Commodity – Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds” at the annual conference of the Financial Analysts Federation in Toronto in May 1983. The findings of his work, namely that portfolios of equities and fixed income exhibit substantially less variance at every possible level of expected return when combined with managed futures, remain as true as ever more than 25 years later. In this brief paper, we attempt to update Professor Lintner’s work by demonstrating that the beneficial correlative properties of managed futures presented in his research persist today. We also reintroduce managed futures as a diverse collection of liquid, transparent hedge fund strategies that tend to perform well in environments that are often difficult for traditional and other alternative investments.
… or maybe more than one. If you’ve decided to include Managed Futures in your investment portfolio, the next step is choosing the right mix of Commodity Trading Advisors to help achieve your investment objectives. Just as managed futures help diversify an investment portfolio, different CTA programs can provide another layer of diversity within the […]
An alternative investment is a product other than traditional investments, such as stocks, bonds, or cash. Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations, and relative lack of liquidity. Some of the more common alternative investment strategies are real estate investment trusts, hedge […]
I was recently interviewed for a few articles and the topic of overlaying strategies was discussed as a potential component of a managed futures portfolio. Realizing this topic is not discussed as much as it should be; it opens the door to a more in-depth understanding of managed futures. It is a topic I cover in my managed futures course at DePaul University.
The stock market just hit an all time high and real estate values continue rising rapidly. Investors could not be happier. The day I refer to, of course, is October 9, 2007 when the S&P closed at its new record of 1565.15. What followed was a bull run in commodities culminating on July 11, 2008 when oil hit its high of $147.27 on dollar weakness and insatiable raw material demand from China. By January of 2009, oil dropped to almost $30 a barrel, the dollar was much stronger as seemingly everyone flocked to its perceived safety, and the worldwide economy would begin digging out slowly from the depths of the credit crisis. The S&P would drop below 700 points.
The world reacted very negatively on Thursday to the idea of a post-quantative easing economy. The oddest thing about the reaction to the Fed announcement was that not only did the stock market plummet but nearly all of the commodity markets fell just as aggressively despite the US Dollar strengthening. The big question now is whether or not the talk of tapering will effectively end the bull run of 2013, and where we go from here. With the market off the highs, sideways over the past few weeks, then sharply lower, it really is an interesting and difficult situation. The market showed us all how weak its legs really are.
Farmers will tell you that “rain makes grain.” That often holds unless the rain is accompanied by winter-like temperatures during the planting season in the key growing areas within the US. As of May 13, the USDA reports that 29% of the corn crop has been planted as opposed to 85% last year. For soybeans, […]
by Tyler Resch, Portfolio Manager, IASG A common theme among my prior newsletters and something I am constantly discussing with my clients is the need for diversification in your managed futures portfolio. There is substantial uncertainty in the market right now and although the Presidential election is behind us, investors seem to have as many […]
As we approach the end of another temperamental summer market we are reminded again of how important it is to assure the diversity of our portfolios. Volatility has again become exaggerated, due largely to a market severely starved of liquidity. Although summer markets are historically thin, this summer has been more dramatically affected due to […]
Contents: S&P Announcement Debt Ceiling Philosophical Clash Fiscal Scenarios Impact on Markets Conclusion Standard & Poor’s downgraded the credit rating oflong-term U.S. sovereign debt from a stellar AAA toAA+ based on “political risks and rising debt burden” with a negative outlook as of Friday, August 5.1Thisrepresents the first time that one of the three majorcredit […]
By Noble DraKolnFounder of Speculator Academy and Author of “Winning the Trading Game” and “Trade Like a Pro” Significant differences in the liquidity, leverage, and costs of futures and ETFs must be understood before making any investment decision. Gold has historically served as a legitimate hedge against inflation and an integral part of a diversified […]
By Michael S. Rulle Jr. There is only one history in financial markets. But there are almost an infinite number of time series one can analyze. Think of all the combinations of markets, units of time (for example, one second, one minute, one hour, etc.) and periods of time within which those units reside (for […]