The following report was produced by our research team and we felt it was worth sharing for discussion and comment. The recent price action in crude oil prompted us to spend a little effort thinking about how to manage around negative prices.
Keep ReadingAdaptive Asset Allocation
Tactical Strategies and The Anatomy of A Bear Market
The last few weeks have been some of the toughest in recent memory for investors, as we have observed an intense global market selloff that began in late February and continued into early March of 2020 (as of the writing of this report).
Keep ReadingGlobal Equity Momentum: A Craftsman’s Perspective – Executive Summary
Quantitative investment researchers often seek uniquely optimal parameterizations of their strategies amongst a broad “robust” region of parameter choices. However, this ignores a critically important feature of investing – Diversification. By diversifying across many equally legitimate parameter choices – an ensemble – investors may …
Keep ReadingPortfolio Optimization and the Sharpe Multiplier: A Case Study on Managed Futures
We’ve spent a great deal of time in past articles discussing the merits of portfolio optimization. In this article we will examine the merits and challenges of portfolio optimization in the context of one of the most challenging investment universes: managed futures.
Keep ReadingPortfolio Optimization: A General Framework for Portfolio Choice
It is widely accepted among investment professionals that, while portfolio optimization has compelling theoretical merit, it is not useful in practice. Practitioners are concerned that optimization is an “error maximizing” ¹ process fraught with insurmountable estimation issues.
Keep ReadingDiversification – What Most Novice Investors Miss About Trend Following
The true benefit of trend following is only realized when investors take advantage of the extreme liquidity and diversity of global futures markets to trade a wide range of markets across all major asset categories. Our analysis shows that an investor would have achieved more than double the risk-adjusted performance of a median equity trend strategy by trading a diversified strategy across many diverse markets.
Keep ReadingCapital Efficiency Trumps Fees in the Search for Portfolio Diversifiers
The article below illustrates how capital efficiency, taxes, and fees impact portfolio choices given what we feel to be reasonable assumptions. However, we recognize that you may have different views on these variables.
Keep ReadingDynamic Asset Allocation for Practitioners Part 4: Momentum Weighting
To be crystal clear, our discussion will NOT focus on trying to identify which signals or parameters, or combinations of signals and parameters, are better or worse than others. While most quants – being tinkerers at heart – waste most of their time fine-tuning the parameters of …
Keep ReadingDynamic Asset Allocation for Practitioners, Part 3: Risk-Adjusted Momentum
So far, we’ve discussed the importance of investment universe selection and price momentum in designing a robust asset allocation methodology. If you haven’t read those articles, we would strongly encourage you to do so before proceeding with this one. We lay most of the …
Keep ReadingDynamic Asset Allocation for Practitioners, Part 2: The Many Faces of Price Momentum
The balance of this series will present ways to harness the momentum effect across global asset classes. The strategies we present will be long-only because such approaches harness two major sources of return: the long-term premia derived from exposure to risky assets …
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