SI340: ETFs, Size, and the Commodity Problem ft. Alan Dunne
Top Traders Unplugged
Intro
This chapter delves into the recent shifts in the U.S. economy, highlighting the Federal Reserve's stance on GDP and inflation. The hosts discuss the potential for stagflation and its risks, while addressing the complexities of monetary policy amid external influences like tariffs.
In today’s episode, Alan Dunne and I take a step back - and a step forward - by exploring 125 years of hard-earned market wisdom, courtesy of the Global Investment Returns Yearbook, the definitive source of long-term asset class performance. What does this rich dataset tell us about equities, bonds, diversification, and the underrated role of patience in investing? And how relevant are these lessons for investors navigating today’s high-concentration markets, stubborn inflation, and the potential cracks in the classic 60/40 portfolio?
But that’s not all - we also dive into one of the most overlooked challenges facing systematic trend followers today: capacity constraints, especially in commodities. Drawing on Quantica’s latest research, we examine why commodities have historically been critical to CTA performance, how liquidity limits silently erode returns as strategies scale, and why the explosive growth of trend following ETFs may come at a hidden cost investors rarely see.
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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE
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Episode TimeStamps:
00:41 - What has caught our attention recently?
04:14 - A new era for Germany?
10:02 - The ETF space is on fire
11:21 - The Nordic countries are on a roll
12:18 - Dunne's global macro perspective
21:39 - Industry performance update
27:07 - An analysis of the Global Investment Returns Yearbook
34:29 - Why are expected returns so far off real returns in the Pension Fund space?
41:07 - The cycle of returns
46:07 - When trend following hits capacity
53:56 - Why Niels is concerned about new replication products
58:52 - Can trading few markets actually provide more diversification than trading many markets?
01:03:40 - What is up for next week?
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