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Bailey McCann, Opalesque New York:

New research out from Ibbotson touches on a key debate happening among investors and fund managers, specifically whether long term trend followers can survive in the new market environment. These strategies have seen significant asset outflows in recent quarters as investors shy away from negative carry positions. Findings in the paper underline some of the risks associated with long term trend following in certain markets - "during a bear market for fixed income, if they are short the asset class, trend-following strategies’ desired performance characteristics during difficult months are likely to reverse - the impact on a portfolio being larger instead of smaller losses."

This is unlikely to come as much of a surprise to anyone watching trend followers over the last two plus years. However, it also raises a more structural question about the role of such programs in a portfolio overall. Long term trend followers had been paid quite well for leaning on fixed income until recently. However, it's hard to make the argument for trend following as an uncorrelated investment if it is so obviously now tangled up in what happens with fixed income.

Quest Partners has been sounding the alarm on this in research pieces of thei......................

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