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.