Tue, Nov 25, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

New research examines quantitative trend following as an equity risk hedge

Thursday, May 16, 2013

amb
Nigol Koulajian
Bailey McCann, Opalesque New York:

New research from Nigol Koulajian founder and CIO, and Paul Czkwianianc, Head of Research at Quest Partners, a New York-based systematic fund, looks at how quantitative trend following could be used as an equity risk hedge. In the paper, authors note that trend following, which has primarily been used and sized as a portfolio diversifier, could actually be used and sized as an equity risk hedge, and at a lower cost than some of the tail risk strategies that have become popular in the wake of 2008. The research also shows significant style drift in the BTOP50* and large trend following shops.

Historically, trend following has helped bolster portfolios during a correction in the equity market but that function has become weaker over the years, limiting the value added to a portfolio. According to the paper, trend following managers have reduced their core style exposures and increased risk-on trades, which have a greater correlation to equities. Risk-on trades include being long equity beta, long hedge fund beta, and long FX Carry. These managers have also increased the time frames of their models as well as increasing their long biased trading overall.

"The biggest CTAs have a diminished ability to hedge equities, many of them use a longer time frame which isn't as good at hedging equities," Nigel Koulajian, paper co-author, founder and CIO, Quest Partners expl......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  2. Greenlight Re CEO says hedge fund reinsurance strategy buzz is validating[more]

    From Artemis.bm: The attention being paid to the hedge fund reinsurance business model and the fact that others are now looking to leverage bits of it within their own strategies, is validating for reinsurer Greenlight Capital Re, according to CEO Bart Hedges. There has been an increasing buzz

  3. Legal - Hedge fund manager fights £8m tax tribunal ruling[more]

    From FT.com: A hedge fund manager who may have to repay £8m in tax is trying to overturn a tribunal ruling that found he had attempted to shelter millions in an avoidance scheme. Patrick Degorce, chief investment officer at Theleme Partners, lost a tax tribunal case last year. HM Revenue & Customs c

  4. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  5. Hedge fund Oceanwood raises $2bn, to close to new investors[more]

    From Reuters.com: Europe-focused hedge fund Oceanwood Capital Management is closing its fund to new investors after its assets under management hit $2 billion (1 billion pounds) recently, a source with direct knowledge of the matter said. Oceanwood, a multi-strategy hedge fund spinout from Tudor Gro