Trend Following
An Alternative Investment
Trend following is a dynamic, non-traditional investment that aims to exploit persistent price shifts in commodities, stock indices, U.S. Treasuries and foreign exchange. It executes a futures trading program and as such necessitates a special futures account.
Most commonly, investors are holding assets, say stocks, bonds, real estate or gold. In contrast, trend following does expose the investor not to an asset itself but to a strategy style. Trend following is a strategy style that is merely utilizing various assets in order to realize its idea.
Trend following returns are uncorrelated or even slightly negatively correlated to those of traditional asset classes. As such, this complementing investment strategy can serve as insurance against severe equity downturns. In addition, trend following’s alternative risk profile typically reduces the volatility of the investor’s overall portfolio. It thus can have a stabilizing effect on the investor’s total wealth.
In its role as commodity trading advisor (CTA), Herges Capital offers trend following to high net worth individuals. This blog aims to provide further insights into this alternative investment.
THE ADDITION OF MANAGED FUTURES TO A PORTFOLIO DOES NOT MEAN THAT A PORTFOLIO WILL BE AUTOMATICALLY PROFITABLE, THAT IT WILL NOT EXPERIENCE SUBSTANTIAL LOSSES OR VOLATILITY AND THAT THE RESULTS OF STUDIES CONDUCTED IN THE PAST MAY NOT BE INDICATIVE OF CURRENT TIME PERIODS OR OF THE PERFORMANCE OF ANY INDIVIDUAL CTA.
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DIRECT INDEXING
TREND FOLLOWING
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Often an initial step for investors is to trustfully forward their latest broker’s statement for us to comment on. Common are also requests to recommend funds out of a 401k program. In both cases fees and sufficient diversification guides our reply.
Why Trend Following
Benefit from prolonged price trends in commodities, equity indices, interest rates or foreign exchange. In particular shifts in the supply-demand balance of commodities can cause lasting price trends. These price adjustments rarely happen instantaneously to the full extent but can be exploited.
In contrast to traditional long-only investments in stocks, bonds and real-estate, futures can just as easily be sold as bought. This characteristic ensures that independent of particular conditions in other markets trend following is possibly able to and indeed aims to produce a positive return in all circumstances.
THE ADDITION OF MANAGED FUTURES TO A PORTFOLIO DOES NOT MEAN THAT A PORTFOLIO WILL BE AUTOMATICALLY PROFITABLE, THAT IT WILL NOT EXPERIENCE SUBSTANTIAL LOSSES OR VOLATILITY AND THAT THE RESULTS OF STUDIES CONDUCTED IN THE PAST MAY NOT BE INDICATIVE OF CURRENT TIME PERIODS OR OF THE PERFORMANCE OF ANY INDIVIDUAL CTA.
