Thu, Jul 30, 2015
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. Opalesque Exclusive: Despite bumpy June/July, CTAs hold on[more]

    Bailey McCann, Opalesque New York: To say that things have been rocky in managed futures recently is putting it mildly. In June, the industry saw its worst month on a performance basis in the past four years. Then yesterday,

  2. Opalesque Exclusive: Michael E. Lewitt: Greece, Puerto Rico, China stock market problems are symptoms of global underlying disease[more]

    Benedicte Gravrand, Opalesque Geneva: Michael E. Lewitt, manager of the Third Friday Total Return Fund, L.P., author and market commentator, says in a Q2 letter

  3. Investing - Hedge funds, seeing opportunity, invest in struggling hotels in Puerto Rico[more]

    From NYTimes.com: Puerto Rico’s tourism industry has fallen victim to the island’s struggling economy, hit by one misfortune after another. In March, the San Juan Beach Hotel filed for bankruptcy. This week, the Condado Plaza Hilton was forced to close its casino. But nearly two thousand miles away,

  4. Investing - Hedge fund billionaires bet on London as revival gathers pace[more]

    From Bloomberg.com: London’s fund industry is bouncing back, and U.S. billionaires Steven A. Cohen and Ken Griffin are grabbing a piece of the action. Griffin’s Citadel and Millennium Management, a hedge fund run by Israel Englander, have bulked up in London, where asset growth is outpacing the U.S.

  5. Opalesque Exclusive: London quant shop launches new improved strategy[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Simon Wajcenberg, CEO of K1T Capital Ltd, a systematic quant based hedge fund asset manager based in London

 

banner