There are three key reasons why trend following is so complementary for stocks and bonds:
1. Long and short: Trend-following strategies take long positions in market uptrends and short positions in market downtrends. Traditional stock and bond investments are only able to profit from uptrends in their respective categories.
2. Novel exposures: Trend-following strategies provide exposure not only to global stock markets and bonds, but also currencies and commodities, spanning energies, base metals, precious metals, crops and livestock. There are few other ways UK investors can gain exposure to movements in the price of cocoa, live hogs and nickel in their investment portfolios.
3. Systematic: Trend-following strategies do not attempt to predict what markets will do next. Instead, they follow trading rules that dynamically adjust the portfolio in response to market price movements. This approach can prove especially valuable when markets behave in a way that forecasters and analysts fail to predict.
Choosing a Trend Following Fund
While the principles of trend following are straightforward, the successful implementation of the strategy is difficult. Experience and a commitment to research and development are critical, as is understanding the nuances associated with operating the strategy.
In this regard, Winton is well placed to help investors gain exposure to this style of investment strategy. The firm is a pioneer of systematic trend-following strategies and is a leader in the space, having navigated its portfolios through the various market environments of the past 25 years. Based in London, Winton is led by one of the most seasoned teams in the trend-following industry and employs 180 staff, most of which work in investment research and technology roles.
The firm’s trend-following strategies were made available in a standalone UCITS format for the first time in 2018 and have performed strongly since, making money during a challenging period for many investment strategies.