This week, Alan Dunne chats with Nick Baltas about CTAs' negative crisis beta and their hidden market timing skills. Nick and Alan tackle the question of how to build an effective trend-following program as part of a larger multi-asset portfolio, in relation to the markets traded and speed of system and tie in insights from a recent Quantica paper. They weigh the benefits of unconstrained trend-following programs versus those with capped equity beta. Plus, they discuss the ideal level of volatility for running an investment program and take a closer look at a Resolve Asset Management paper on the best ways to construct carry strategies.
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Episode TimeStamps:
01:23 - What has caught our attention recently?
03:00 - Industry performance update
05:32 - Reversions incoming?
07:06 - Q1: Regarding how to choose instruments in your trend following algorithm
14:20 - Getting the speed right
17:37 - Q2: At what point does volatility put an investor in a danger zone?
24:32 - Discussing the paper "Negative Crisis Beta" from Quantica
38:16 - Capping the beta
45:17 - The hidden market timing of CTAs
50:23 - The benefits of adding carry to your portfolio
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