Key Takeaways
- • Trend following strategies have regained prominence as a systematic approach to capturing profits across multiple asset classes (equities, commodities, currencies, bonds) in an environment of increased volatility and shifting macroeconomic regimes.
- • Bonds have become a less reliable portfolio diversifier, increasing volatility in traditional benchmark portfolios and creating demand for broader sources of return diversification beyond conventional equity-bond allocations.
- • Trend following offers unique portfolio benefits through dynamic market adaptation, simultaneous long and short positioning capabilities, and broad investment universe exposure, reducing concentration risk across single asset classes, sectors, or regions.
- • Schroders has operated trend following strategies for over a decade, positioning the firm as an established provider of these systematic return-generating approaches in the alternative investment landscape.
- • The strategy's research foundation spans centuries of historical evidence and academic validation, providing institutional investors with a rules-based, behavioral-grounded investment mechanism that can function as a "release valve" during market stress events.
Summary
Trend following strategies have emerged as increasingly relevant tools for institutional investors navigating volatile markets and evolving macroeconomic conditions. The strategy operates as a systematic investment approach designed to capture sustained price trends across diversified asset classes—equities, commodities, currencies, and fixed income—rather than relying on directional forecasting or benchmark-driven allocations. This broad-based exposure addresses a critical structural weakness in traditional portfolio construction: the deteriorating reliability of bonds as a diversification mechanism, which has heightened portfolio volatility and intensified the search for alternative return sources.
The core appeal of trend following lies in its adaptive nature and multi-directional positioning capacity. Unlike conventional long-only portfolios concentrated in equities and bonds, trend following strategies generate returns through a diversified systematic framework that can establish both long and short positions across multiple markets. This capability mitigates concentration risk by eliminating overexposure to individual asset classes, sectors, or geographic regions. For institutional allocators seeking exposure to commodities, trend following presents a particularly valuable application—providing inflation sensitivity and commodity returns without the structural inefficiencies of benchmark-driven commodity allocations.
Schroders, with over a decade of operational experience managing trend strategies, has positioned itself within this space as the strategic allocation framework gains traction among long-term investors. The firm emphasizes the cash efficiency of trend following structures and their ability to enhance portfolio performance through diversifying returns, particularly in today's complex investing environment where traditional risk-reduction tools have become less effective. The historical research foundation supporting trend following—spanning centuries of empirical evidence—underscores its validity as a rules-based, behavioral-grounded investment mechanism capable of providing portfolio stability during market dislocations.
The core appeal of trend following lies in its adaptive nature and multi-directional positioning capacity. Unlike conventional long-only portfolios concentrated in equities and bonds, trend following strategies generate returns through a diversified systematic framework that can establish both long and short positions across multiple markets. This capability mitigates concentration risk by eliminating overexposure to individual asset classes, sectors, or geographic regions. For institutional allocators seeking exposure to commodities, trend following presents a particularly valuable application—providing inflation sensitivity and commodity returns without the structural inefficiencies of benchmark-driven commodity allocations.
Schroders, with over a decade of operational experience managing trend strategies, has positioned itself within this space as the strategic allocation framework gains traction among long-term investors. The firm emphasizes the cash efficiency of trend following structures and their ability to enhance portfolio performance through diversifying returns, particularly in today's complex investing environment where traditional risk-reduction tools have become less effective. The historical research foundation supporting trend following—spanning centuries of empirical evidence—underscores its validity as a rules-based, behavioral-grounded investment mechanism capable of providing portfolio stability during market dislocations.
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