Eric Crittenden & Jason Buck Explain Why Best Investors Follow the Trends | #533
May 10, 2024
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Eric Crittenden, CIO of Standpoint Asset Management, and Jason Buck, CIO of Mutiny Funds, discuss trend-following sentiment and optimal diversifiers. They touch on the Herschel Walker trade, portfolio construction, diversification myths, away from 60/40 portfolios, interest abroad, Paul Mulvaney's success, and pairing trend following with factor investing.
Successful wealth preservation involves transitioning from concentrated risk to broad diversification.
Preparation through diversification and risk management is more effective than predicting market outcomes.
Globally diversified strategies play a vital role in wealth management and investment success.
Shifting towards proactive risk management and diversified asset allocation is crucial in navigating market uncertainties.
Deep dives
Preparing for Wealth Growth and Preservation through Diversification
Maintaining wealth and ensuring its growth and preservation are key objectives for individuals, especially after a liquidity event like an entrepreneur's first sale. The strategy involves moving from concentrated risk to broad diversification, combining global stocks and bonds, trend following, and long volatility and tail risk strategies. The goal is to build a diversified portfolio with multiple return streams, aiming to protect wealth and navigate varying macroeconomic events.
Challenges in Predictive Versus Preparation-Based Investment Approaches
The discussion delves into the preference for predicting market outcomes versus preparing for various scenarios. While predictions often grab attention and interest, the effectiveness of preparation through diversification and risk management is more crucial. The focus shifts towards being prepared for various market conditions, given the uncertainty and complexity of financial markets.
Navigating Market Trends through Globally Diversified Strategies
In light of the shifting landscape of market trends and unpredictability, globally diversified strategies play a significant role in wealth management and investment outcomes. The approach involves integrating various asset classes, including global stocks and bonds, commodity trend following, and long volatility and tail risk strategies to capture opportunities from diverse sources.
Evolution from Predictive Asset Management to Omega Risk Transfer Strategies
The conversation highlights the transition from predicting market outcomes to emphasizing Omega risk transfer strategies, focusing on risk management and preparedness rather than speculative predictions. The adoption of globally diversified solutions, especially with emphasis on long volatility and tail risk management, indicates a shift towards proactive risk hedging and strategic asset allocation.
Trends in Asset Allocation Strategies and the Role of Broad Diversification
Discussions revolve around evolving asset allocation strategies that emphasize broad diversification through a mix of global assets, trend following, and volatility management approaches. The goal is to capture potential windfalls from diverse sources and navigate market uncertainties with a balanced and diversified approach, shifting focus from predictive models to proactive risk management strategies.
Trend Following Strategy and Capacity Constraints
In the podcast episode, the discussion revolves around the effectiveness of trend-following strategies and how they interact with capacity constraints. It is highlighted that traditional trend-following approaches are still valid, even amid doubts from some quarters. The concept of pyramiding into positions is emphasized, showcasing a more selective approach to position sizing in trending markets. Moreover, the importance of managing capacity effectively to achieve desired returns, especially in smaller markets, is underscored.
Entertainment Industry and Investment Narratives
Another key focus of the podcast centers on the idea that the investment world operates more as an entertainment business than commonly perceived. The discussion delves into how personal branding and entertaining presentation styles play a significant role in attracting and retaining investors. The narrative-driven nature of investment discussions and the importance of engaging storytelling to captivate audiences are highlighted as crucial aspects of navigating the investment landscape.
Pairing Trend Following with Investment Styles
The episode explores the potential benefits of pairing trend-following strategies with different investment styles, such as growth and value investing. Through research and analysis, it is suggested that growth investing aligns better with trend-following strategies compared to value investing. Furthermore, the blending of trend-following with corporate bonds is identified as a favorable combination that offers enhanced diversification benefits. The discussion underscores the importance of selecting suitable investment styles to complement and enhance the efficacy of trend-following approaches.
Today’s guests are Eric Crittenden, CIO of Standpoint Asset Management, and Jason Buck, CIO of Mutiny Funds.
In today’s episode, we talk about the sentiment around trend-following today. We discuss optimal diversifiers for trend-following, how the Herschel Walker trade relates to portfolio construction, and if investors are as diversified as they think they are.
(1:01) - Welcome back to our guests, Eric and Jason; Episode #389: Eric Crittenden; Episode #440: Jason Buck
Sponsor: Today's episode is sponsored by YCharts. YCharts enables financial advisors to make smarter investment decisions and better communicate with clients. Visit YCharts to start your free trial and be sure to mention "Meb" for 20% off your subscription (new clients only).
