Research, insights, and thought leadership from the GVS community.
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We introduce a framework for the construction of systematic strategy portfolios providing reliable diversification in equity drawdowns. In backtesting, our approach does not suffer from negative carry as option hedges do. Clustering, strategy modulations, and dynamic exposure accentuate the profile.
The manner and dynamics which a market exhibits as it moves to the downside can be one of the most insightful pieces of information for investment professionals. Selloffs come in all shapes and sizes and while many can feel traumatic, they often exhibit vastly different characteristics. As volatility professionals, we are equally focused on both the speed and magnitude of market movement during selloff periods.
Trend-following indices, such as the SG Trend and Barclay BTOP50, have posted their best year-to-end-May returns since 2000, against a backdrop of poor performance from traditional asset classes such as equities and bonds.
Complex macro and geopolitical events have made this a challenging environment for investors. Markets have been soaring while valuations and risks keep getting worse. Though investments have had a spectacular decade, the future may be tricky. Risk reduction will be an important consideration, but costs could be prohibitive...
Is your portfolio able to withstand a regime shift? Investors commonly make outcome-defining allocation choices based on historical data from the preceding couple decades. We explore why deploying such tactics may lead to allocators relying on transient correlations for diversification. Instead, we propose allocating to structural diversifiers in order to build resilience to regime changes.