01 Jul Learning From Natixis' "Crisis Alpha"

Managed Futures funds are cost effective diversifiers in a portfolio, providing “crisis alpha”.

In this article, Absolute Momentum will be used interchangeably with trend following or time series momentum. Relative Momentum will be used interchangeably with cross-sectional momentum or relative strength.

The paper described Managed Futures Fund’s ability to perform during Equity crisis periods and their low correlation to both stocks and bonds.

AlphaSimplex takes a diversified approach in terms of time horizon of trades, following short, medium and long time horizon trends. The weights to each time horizon strategy is also dynamic.

Some other hedging/tail risk strategies such as buying put options, can provide effective protection during Equity crisis periods but the cost of hedging can be prohibitive over the long term.

Research Paper: Market Insights: Crisis Alpha

Author: Robert W. Sinnott

Company: AlphaSimplex Group