Trend Following

The Raisons d'être of Managed Futures

Managed Futures strategies have an implicit dual mandate, First, to deliver positive returns on average and second, to generate especially attractive returns during large equity market drawdowns. This is one of the big reasons managed futures strategies can be valuable in a portfolio. Unfortunately, by and large, the industry—intentionally or not—has been optimizing for one at the expense of the other by introducing carry and market beta exposure.

Value

We Are Not Just Value! Except, You Know, When We Are...

Our systematic stock selection process is far from just “value.” And yet from 2018-2020 for the bad and 2021-2022 for the good, our world has indeed been all about value. What gives? This post reviews our correlation to value, delving into a few periods when it became the dominant part of our process. We find that when value dominates, it has usually been in bubble periods of irrational losses for value (and in their more pleasant aftermaths).

Tax Aware

Regardless of How You Deal with Low-Basis Stock, Long-Short Strategies Can Help

Most investors recognize that concentrated stock holdings are risky, but the outright sale of a low-basis stock incurs a punitive tax burden. In this post, we highlight several tax-efficient alternatives to an outright sale and explore how long/short strategies can help enhance this tax efficiency.

Factor/Style Investing

Value Investing Is Not All About Tech

It often seems like the world sees value investing as either implicitly or explicitly all about the technology sector vs. everything else. In reality, there are many different kinds of strategies and bets that are often labeled “value.” Our value bet is long and short extremely diversified portfolios of global stocks with a serious attempt not to bet on industries (like tech) – and we are very happy about that, both long-term strategically and tactically today.

Portfolio Construction

The Stock/Bond Correlation

For the past two decades, the stock/bond correlation – a fundamental detriment of risk in traditional portfolios – has been consistently negative. However, this hasn’t always been the case, and a positive stock/bond correlation could reappear due to macroeconomic changes. In this article, we assess the broad implications this would have for investors and set out practical steps to prepare for such an outcome.

Alternative Investing

Building a Better Commodities Portfolio

Interest in commodities is rising again, thanks to their tendency to be particularly strong diversifiers during periods of rising or volatile inflation. We review what a “best-in-class” commodity portfolio looks like by exploring three potential enhancements to a passive approach to the asset class.

Tax Aware

Can Your Loss-Harvesting Strategy Still Harvest Losses?

As equity portfolios appreciate over time, opportunities to harvest losses become few and far between. Whether you’ve been invested in a passive equity portfolio or in a Direct Indexing strategy, you’ve likely found that harvesting losses was much easier in the first few years after inception. Beyond that, not only does harvesting losses become a challenge but even keeping up with index reconstitutions might be difficult without recognizing capital gains. Appreciated portfolios—once a benefit—become a liability later in their life-cycle.

Alternative Investing

Time to Diversify – But into What?

The last 10 years were exceptional for traditional stock/bond portfolios. But with stock market valuations near all-time highs and bond yields near all-time lows, prospective returns look bleak. We make the case for diversifying out of equities and explain the valuable role liquid alternative strategies can play.

Tax Aware

Why You Might Defer Your Gains, Even When Tax Rates Are About to Increase

With the current proposals for (and the future expectations of) various tax rate hikes, investors with appreciated portfolios might feel like sailing into a storm and wondering, is it still better to defer gains if tax rates were to increase?

Macroeconomics

Inflation Outlook: the Macro, the Micro, the Transitory

Financial markets have had a relatively muted reaction to the recent bout of higher than expected inflation. We assess what might explain markets’ sanguine response. We explain why we believe there are factors suggesting a return to low inflation readings is unlikely in the near term, and what the investment implications might be of such a scenario.