Yet only a fraction of the investing community have embraced trend following and managed futures, and scepticism often surrounds the durability of the returns. Over that period, had an investor taken 20% from the 60-40 portfolio and allocated to a portfolio of trend-following funds, as measured by the SG Trend Index, the resulting portfolio would have had a higher return, lower volatility, smaller largest drawdown and higher Sharpe ratio than the 60-40 portfolio (Table 1). Since inception in 2000, the SG Trend and lower-volatility SG CTA Indices have posted annualised returns of 6.1% and 4.8%, respectively, both with slightly negative correlation to the S&P 500 Index. However, the value of allocating to managed futures was even greater in 2022 given both bonds and equities declined on the year.Ī longer-term perspective also reveals compelling reasons to include managed futures and trend following in a multi-asset portfolio. ![]() It is not the first time these strategies have generated returns when equities were down: 20 were other strong years. The SG CTA index, an index of the 20 largest managed futures managers, was up 20% while the SG Trend index, comprising the largest funds focused on trend following, was up 27%. Trend following and managed futures funds were some of the strongest performers in 2022. For investors able to overcome these challenges, trend following offers potentially valuable portfolio diversification, particularly amid heightened macro volatility. ![]() The somewhat random return profile and periodic drawdowns can make it a tough investment to hold. ![]()
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