SI284: Choosing Your Trend Following Battles ft. Nick Baltas

Feb 24, 2024

Goldman Sachs's Nick Baltas discusses factor regression for managed futures, trend following outlook, optimal portfolio construction, timing investments, trading alternative markets, and more in a deep dive into trend following battles and strategies.

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INSIGHT

Factor Regression Use

Factor regression can help explain managed futures returns, but doesn't determine alpha.
It's more useful for performance attribution than manager selection.

INSIGHT

CTA Industry Consolidation

The number of CTAs has declined by 30% annually, reflecting industry consolidation.
This trend suggests a skewed asset distribution towards larger managers.

INSIGHT

Trend Following's Volatile Year

Trend following's performance in 2023 was volatile, despite a favorable macro outlook.
This volatility, following a strong 2022, creates uncertainty about future performance.

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Goldman Sachs's Nick Baltas joins us today, to help us uncover if it is meaningful to use factor regression to evaluate managed futures. We also weigh in on couple of articles, relating to the outlook for trend following and the state of the industry, before turning our attention to some hard core research into how to construct the optimal trend following portfolio and why it is important to be conscious of which battles you pick. Lastly, we discuss the challenge of timing an investment into trend following, the pros and cons of trading alternative markets and more.

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Episode TimeStamps:

00:23 - What has caught our interest recently?

03:04 - The Nikkei index finally comes out it its 35 year drawdown

05:35 - Industry performance update

07:37 - Q1, Oliver: Does it makes sense to use factor regression to evaluate managed futures?

14:24 - The state of the industry

18:17 - Is trend following flopping?

27:34 - Building optimal trend following portfolios

36:15 - Pick your battles

49:10 - Is there a way to time trend following?

53:34 - Is it actually an advantage to trade alternative markets?

01:04:44 - Thanks for listening

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