A lot of “alpha” strategies can be deconstructed into simple rules based portfolios (that some call alternative beta). I’m not referring to the factor based or distribution based (which I don’t like…)
So, after the Broncos loss I figured what better way to get out of a funk than to read some finance books? (If you’re already depressed reading boring investment books can’t make it any worse.)
Following the Trend: Diversified Managed Futures Trading was actually really good – and I feel like it is pretty rare to say that these days. It basically lays out how to replicate the vast majority of the managed futures industry with a simple system(s). (Covel’s book is great too.)
It reminds me a bit of that Bridgewater piece on replicating basic hedge fund strategies with rules based investing : Hedge Fund Returns Dominated by Beta – May 3, 2012
Granted, long time readers know that I am a big fan of simple rules based portfolios, heck that’s behind most of everything I do, from the buy and hold and 13F portfolios of The Ivy Portfolio to the trend portfolios of a QTAA. Frankly most all of the 2&20 world can be deconstructed at less than 1%. I’ve been hoping/cheering for more managed futures ETFs, and now that the derivatives bars have been lifted, I’m hoping to see a lot more…(search archives for “managed” for some posts).
In a follow up post soon (waiting on Dec data) I will look at a comparison of the top trendfollowing funds. Stay tuned!