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The Return of Systematic Trend?

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Strategy Deck: Systematic Trend

Looking back at 35 years of historical performance, including a decade (2010-2019) of sideways returns, is the stage set for a resurgence of managed futures?



Throughout the '80s, '90s and '00s, Systematic Trend strategies established what we view as a compelling track record. Available mostly to institutional investors, managed futures and momentum-based strategies earned a reputation for providing historical non-correlated absolute returns and crisis-risk alpha that successfully diversified traditional investment portfolios. The strategy performs best in periods when there are persistent trends across global markets, represented by diverse futures exposures across all four macro asset classes - equity, fixed income, commodities and currencies.

In contrast, the post-GFC climate of the 2010s saw unprecedented, accommodative monetary policy that artificially compressed volatility and interest rates while buoying traditional portfolios of equities and bonds. The 60/40 asset allocation set a high bar for investment performance, compounding at close to 10% per annum over the decade, while Systematic Trend delivered just 1.8% per annum including four negative years. This era also coincided with retail availability in mutual funds and ETFs, leaving many financial advisors disillusioned about the viability of using managed futures funds in client portfolios.

In this detailed yet straightforward presentation, Altegris Research looks at 35 years of Systematic Trend strategy performance and considers the possibility that an economic regime change may already be upon us. Global inflation, rising geopolitical tensions and slow-moving central bank policies may have laid the groundwork for a more robust trending environment in global financial markets.  If so, Systematic Trend strategies might again provide the robust portfolio diversification experienced by earlier investors. Financial advisers should take note

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