The Meb Faber Show - Better Investing Kathryn Kaminski - Don’t Fire Your Diversifier | #604
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Oct 31, 2025 Kathryn Kaminski, Chief Research Strategist at AlphaSimplex, dives into the world of managed futures and crisis alpha. She examines the recent struggles in managed futures, emphasizing the importance of patience during drawdowns, which historically reward investors when trends recover. Kathryn discusses the role of managed futures as a diversifier to equities, the rise of ETFs, and how crisis alpha strategies capture extreme market shifts. She also highlights the emerging use of AI in refining these strategies, paving the way for more efficient investing.
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Turbulence Breaks Trend Systems
- Managed futures struggled in 2025 due to a massive market shock and subsequent turbulent, choppy trading days.
- Kathryn Kaminski says turbulence days feature coordinated sell-offs, high volatility, and lack of trend, which break technical strategies.
Drawdowns Are Historically Cyclical
- The recent drawdown was the second-worst for the SOCGEN CTA/trend index since inception.
- The deepest and longest drawdown was the 2019–2021 trade-war episode, which preceded a strong 2022 rebound for trend following.
Drawdowns Often Coincide With Good Equity Markets
- Managed futures drawdowns often occur during strong equity markets, not only during equity stress.
- Recoveries tend to be fastest when equities experience drawdowns, showing managed futures' countercyclical role.
