How Managed Futures Can Improve Portfolio Performance During Inflationary Times and Crisis Periods

 

Trend Following is a systematic approach to trading a diversified set of futures contracts, both commodities and financials.  The strategy detects and exploits trending behavior and has no long or short bias; it can benefit from positive or negative momentum.  

Over time trend following has exhibited no correlation with any major asset classes, including stocks, bonds, and real estate; it adds true diversification to an overall portfolio.  Historically, this strategy has performed exceptionally well during inflationary periods and equity market dislocations, as these events create trends across virtually all sectors.  

Currently, markets are have entered an inflationary environment.  To mitigate the impact or duration of inflation, the Fed has indicated that it will increase rates and reduce quantitative easing; which could trigger an extended drawdown in markets that have relied on easy money policies for years.  Either scenario, sustained inflation or equity market dislocation, could create a ripe environment for trend following with managed futures.  

 

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