Research Affiliates timely piece on this topic. It may be behind a firewall, but hopefully not. They include actively shorting asset classes in declining trend, which leads to big gains in equity selloffs:
* Trend-following strategies can offer attractive, positively skewed returns, with large positive
outperformance often coinciding with large equity selloffs, thereby offering tail protection.

* Not all trend strategies are the same. Increased positive skewness often comes with a lower
Sharpe ratio, offering decision points for managers of such strategies.

* The tradeoff between the Sharpe ratio and skew is directly related to signal and portfolio construction decisions.

The SG Trend Index they follow shows a CAGR of 7.3% from 2000-2014, declining to 3.9% from 2015 to 2024. The first period obviously coincides with the "lost decade"+ for US stocks with two big bear markets; the second period the secular bull market since. Allocating to anything else other than US Large Cap and Large Cap Growth the last 10 years has decreased returns. This is no surprise, but it's interesting to see a research paper detailing it. I'd never heard of that index but it follows "Commodity Trend Advisors (CTA)" investment allocations.

A quote:
During good times, investors often forget why they bought the policy in the first place. In other words, they forget why they are allocating to a lower-returning trend portfolio instead of the other parts of the portfolio that are offering higher returns. According to Greyserman (2017), “Trend following’s positive skew creates a tension with the Sharpe ratio, as investors may misjudge performance due to behavioral biases favoring frequent small wins over rare large gains.” In other words, trend is like an insurance policy: investors pay premiums in the form of many small losses during periods of low volatility in exchange for winning big in a high-volatility event.

Article: https://www.researchaffiliates.com/content/dam/ra/...

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