Following Trends & Crisis Alpha with Managed Futures

What is crisis alpha and how trend following managed futures strategies work as a strategic allocation is explained.

  • Crisis alpha is a concept Kathryn Kaminski came up with more than 10 years ago when following the financial crisis of 2008–2009. She was focused on trying to understand which strategies do well in periods of stress in markets.
  • Looking back at 800 years of crisis, she found that all crises created trends, but each crisis was very different.
  • During the COVID-19 market crisis, we’ve seen strong trends in fixed income and commodities. Also, we’ve experienced one of the largest falls in equity markets in history. The way that these trends developed in 2020 was very different than during the crisis in 2008.
  • Kaminski believes moments of uncertainty and stress definitely drive trends of all different sorts. This means that there’s potential for crisis alpha going forward throughout the rest of 2020, given heightened volatility and uncertainty of COVID-19’s economic impact around the globe.
  • We need to remember that investing should be strategic. And managed futures, as a strategy, should be considered a strategic investment in an overall long-term portfolio.
Published in April 2020