“If you believe we are going to have a bear market, CTAs [aka trend following] will have a chance to make money in that environment, and in the meanwhile they offer non-correlated returns.”
Such “systematic” funds [aka trend following], which surf trends using financial models and algorithms, do well whenever there is a clear direction for markets. Down markets are as good as uptrends, so long as they are clear, and in January and most of February, financial uncertainty proved profitable.
Ewan Kirk, chief investment officer for Cantab Capital, said “while there is no such thing as a ‘typical’ systematic manager, many managers in our space have been short energies and long bonds since the beginning of the year”.
That chart always makes me recall a moronic line from Ben Stein: “If you made money in October 2008 you were doing something wrong.”
You don’t want volatility? That’s ok. It’s all a trade-off. The big question: Can you imagine something like October 2008 happening again and what will you do?
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