Eclipse Capital Management, a prominent trend follower, recently authored a white paper addressing performance. Their key conclusion was a nice academic way of saying, “stay in for the long term and don’t get out at the bottom!”
Their comment:
“By increasing one’s holding period, the investor reduces the probability of GMP [Global Monetary Program – a trend following fund] underperformance to a point where it is a minimal risk, while at the same time having the potential to participate in periods of substantial outperformance. This very attractive pattern is similar, but not identical, to that of call option – where the risk is limited and the upside unlimited.”
Eclipse Capital Management