Benchmarking a trend-following strategy is difficult. The tendency is to compare it to an equity strategy, but this often leads to disappointment. We explore a better benchmark that allows investors to accurately measure performance and set expectations.
We typically explore trend following as a risk management technique for investors sensitive to sequence risk, but it may also be a way to allow growth investors to benefit from leverage by reducing the risk of permanent portfolio impairment that would otherwise occur due to large drawdowns.
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