The Importance of Diversification in Trend Following
Single-asset trend following strategies can play a meaningful role in investor portfolios, but success requires introducing sources of diversification within the strategy. We believe the increased internal diversification allows not only for a higher probability of success.
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Risk Ignition with Trend Following
Trend following strategies may represent a beneficial diversifier for conservative portfolios going forward, potentially allowing investors to more fully participate with equity market growth without necessarily fully exposing themselves to equity market risk.
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Failing Slow, Failing Fast, and Failing Very Fast
Failure to meet your financial objectives can take one of two forms: fast failure and slow failure. Failing fast involves suffering large losses at the wrong time as the result of taking too much risk. Failing slow involves achieving insufficient growth due to taking too little risk.
Read more.Diversifying the What, How, and When of Trend Following
Naïve and simple long/flat trend following approaches have demonstrated considerable consistency and success in U.S. equities. We explore how investors can think about introducing greater diversification across the three axes of what, how, and when in effort to build a more robust tactical solution.
Read more.Protect & Participate: Managing Drawdowns with Trend Following
For investors looking to diversify how they manage risk, we believe the trend following represents a high transparent, and historically effective, alternative.
Read more.Two Centuries of Momentum
As a systematized strategy, momentum sits upon nearly a quarter century of positive academic evidence and a century of successful empirical results.
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You Are Not a Monte-Carlo Simulation
Our lives are not a monte-carlo simulation. Because we all live in a multi-period world where we have a single investment portfolio that compounds over time, managing risk can help us maximize our long-term growth rate even if it seems foolish in hindsight.
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Thinking in Long/Short Portfolios
While few investors explicitly hold long/short portfolios, every active portfolio can be thought of as the benchmark plus a long/short representing the active bets. We use this framework to distinguish the quantity versus quality of active exposures.
Read more.Should You Dollar-Cost Average?
Dollar-cost averaging (DCA) is often touted as superior to lump sum investing, but there are many scenarios where DCA may be inferior. The market environment and investor behavior both play large roles in the decision of which route to take.
Read more.Timing Bonds with Value, Momentum, and Carry
In this research note we explore quantitative trend, value, and carry signals for timing exposure to bonds and find evidence of their historical efficacy.
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Quantifying Timing Luck
Timing luck is the difference in performance of two identically managed portfolios, rebalanced on different days. We derive a model for quantifying timing luck and present a solution for controlling it.
Read more.Factor Investing & The Bets You Didn’t Mean to Make
Factor-based investment strategies seek to manage risk with diversification; completely unconstrained, however, they can be overwhelmed by unintended bets.
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Levered ETFs for the Long Run?
Levered ETFs are often dismissed as not suitable for buy-and-hold investors, but they may be able to play a role in creating risk-efficient portfolios.
Read more.Portable Beta: Making the Most of the Returns You’re Already Getting
We introduce the idea of "portable beta": synthetic, additional exposure to asset classes achieved through efficient derivative exposure.
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Are Market Implied Probabilities Useful?
Market-implied probabilities may apply for "typical households", but actual probabilities are more relevant to the unique goals and situations of investors.
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It’s Long/Short Portfolios All The Way Down
Long/short portfolios can provide us with a unique framework to think about portfolio differences, and a unique way to quantify value-add for fees paid.
Read more.The Frustrating Law of Active Management
We introduce the Frustrating Law of Active Management: For a strategy to outperform in the long run, it has to underperform in the short run.
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Addressing Low Return Forecasts in Retirement with Tactical Allocation
Low return forecasts make risk management crucial. Tactical strategies have been effective in the past, and moderate allocations can make a big difference.
Read more.Tax-Managed Models & Asset Location
We explore how tax-adjusted expected returns can be created and used in effort to create tax-managed portfolios that can maximize post-tax returns.
Read more.The Butterfly Effect in Retirement Planning
Examining the significant impact of changes in assumptions, including spending and return assumptions, on retirement planning analysis.
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