The Importance of Diversification in Trend Following

Bruno: Some replicators replicate the CTA returns with, I don't know, 10, 15, maybe 20 of the most liquid instruments. But you give up again this theoretical or real result of diversification benefits by adding just more. And my estimate for that alone would be that will result in a low ratio of around 0.2 over the long term. Alan: Our long-term outlook should lead to a long-term sharp ratio of approximately one on a gross basis, before a fee is above the implementation. Bruno: Still not trend following, as we all know, is a very painful strategy and makes managing difficult.

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