Top Traders Unplugged
SI404: When Trend Following Meets Equities ft. Eric Crittenden & Andrew Beer
- Managed futures ETF evolution: Strong growth in the 40 Act space since 2019. Market maker infrastructure improving, enabling complex portfolios (like Crittenden's multi-asset approach) to operate efficiently in ETF wrappers. Distribution bottleneck being resolved as advisors increasingly adopt ETF-only models.
- Equities plus trend following: The "magic combo" delivers statistically robust diversification. Crittenden's equal-risk-contribution approach (roughly equal volatility from equities and managed futures) balances psychological durability with performance, solving allocator drift problems where strategies are abandoned after short drawdowns.
- Simplicity versus complexity in systematic investing: Simple, blunt trend-following rules outperform elegant, complicated models in live trading. Crittenden's 29-year experience shows correlation optimization and other sophisticated overlays fail in real markets, despite looking superior on backtests. Single instruments (energy, metals, dollar complexes) drive most trend returns.
- Index vs. individual manager performance: Sock-Geit CTA Index includes dead funds and survivorship bias, understating true industry capability. Large, well-managed CTA firms (many not in indices) sustainably achieve higher Sharpe ratios. Index blowups and drops suppress reported performance.
- Messaging and terminology: Beer argues the space suffers from branding issues. Proposes "Contrarian Tactical Alpha" (CTA) to better convey core function: buying unloved assets early, not chasing trends late. Emphasizes algorithmic discipline enables uncomfortable positions (e.g., shorting equities in 2002, 2008) that generate alpha.
- Product alignment and manager ownership: Managers with significant personal capital in their products make different design choices than large asset managers running one-off products. Crittenden and Beer's portfolios reflect personal wealth exposure, creating long-term accountability absent in multi-product conglomerates.