Mar 15, 2023
In this episode, Adam, Rod and Mike review a new whitepaper called Peering Around Corners: How to Replicate Trend Following Managed Futures. They cover the motivation, methods, analysis and conclusions including:
· why managed futures produce strong returns
· the role of managed futures in a stock / bond portfolio
· why every strategy is vulnerable to lost decades, and the role of diversification
· why investors probably shouldn’t be worried about flows to managed futures
· why replication does not negate the presence of manager alpha
· how replication is related to returns based style analysis
· how other authors replicated Buffet’s alpha and how it relates
· why one might want to replicate a managed futures index
· choice of simple vs complex replication methods
· top down replication methods - pros and cons
· bottom up replication methods - pros and cons
· why top down and bottom up replication complement each other’s strengths and weaknesses
· how well a combination of top down and bottom up replicates the trend following index
· why investors might expect to achieve fee alpha from managed futures replication
· and much more…
This discussion of a new whitepaper should help investors understand how replication strategies work and the role that a managed futures replication strategy might play in portfolios.
This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management Inc.
*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.