Tactical Asset Allocation Research

Does International Diversification Work?

By |February 28th, 2023|Factor Investing, Research Insights, Basilico and Johnsen, Academic Research Insight, Tactical Asset Allocation Research|

In this article, the authors examine the research on the benefits of international diversification. Some argue that because equity markets generally crash simultaneously, there are no benefits to having equity diversification. The evidence from this paper rejects this hypothesis.

Is Relative Sentiment an Anomaly?

By |August 19th, 2022|Relative Sentiment, Research Insights, Tactical Asset Allocation Research|

Relative sentiment is an indicator that measures the positions, flows, and attitudes of institutional investors compared to those of individual investors–where institutions typically consist of large asset managers, insurance companies, pension funds, and endowments. In some instances, however–depending on the dataset and the asset class under consideration–institutions might also include hedge funds, CTAs, and other large speculators. 

Treasury Bonds: Buy and Hold or Trend Follow?

By |August 10th, 2022|Research Insights, Trend Following, Introduction Course, Tactical Asset Allocation Research|

If one had to invest in buy and hold treasury bonds or trend-followed treasury bonds, it is likely that most investors would prefer the trend-followed bond investment. However, in a broader portfolio context, the analysis suggests that how one 'eats' their bond exposure is largely irrelevant and the portfolio's long-term outcome will be driven by equity market dynamics. Bonds systematically lower an equity-centric portfolio's returns, but they also lower the risk profile of the overall portfolio.

Trend Following Says Commodities…But Nothing Else!

By |August 3rd, 2022|Research Insights, Trend Following, Introduction Course, Tactical Asset Allocation Research|

The analysis above highlights that we are in a rare regime when commodities are the only long asset with a positive trend. The last time this happened we entered a long period of high inflation and poor real returns. Will this happen again? Who knows. But we do know that post-1973 we entered a world where, for several decades (at least up to around 2007), both bonds and commodities were an important component of a diversified portfolio. The recent past has arguably made investors complacent in their reliance on a stock/bond portfolio as an end-all-be-all solution. When history tells us that incorporating commodities into a portfolio probably makes sense from a diversification standpoint.

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