Excess Returns Whipsaws, Drawdowns, and Disbelief | Eric Crittenden on the Best Diversifier No One Buys
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Jun 28, 2025 Eric Crittenden, CIO of Standpoint Funds and a seasoned expert in trend following and risk transfer markets, dives deep into the world of resilient investing. He shares candid insights on why many investors misunderstand managed futures and discusses the psychological challenges of maintaining client relationships during market drawdowns. Eric advocates for blending passive equities with systematic macro strategies and critiques the reliance on bonds as diversifiers. With a philosophical lens on risk and market design, this conversation sheds light on the complexities of modern investment.
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Client Types and Asset Retention
- Clients fall into groups based on their due diligence and understanding of trend following strategies. - About one-third of assets are transitory, often lost when drawdowns exceed expectations.
Set Realistic Investment Expectations
- Set realistic expectations with empirical data and simulations to prepare clients for drawdowns. - Use historical data, like the volatile 1970s, as a plausible stress test scenario for trend following.
Investor Reluctance to Add Funds
- Most clients resist adding funds during trend following drawdowns despite sound logic. - Repeated 'buy the dip' messages often fatigue investors, making proactive outreach challenging.