TY - JOUR T1 - Protecting the Downside of Trend When It Is Not Your Friend JF - The Journal of Portfolio Management DO - 10.3905/jpm.2019.1.087 SP - jpm.2019.1.087 AU - Kun Yang AU - Edward Qian AU - Bryan Belton Y1 - 2019/06/03 UR - https://pm-research.com/content/early/2019/06/03/jpm.2019.1.087.2.abstract N2 - Simple trend-following strategies have been documented as cost-effective, transparent alternatives to the hedge-fund style managed futures strategies. Although largely capturing the returns of the managed futures industry, those simple strategies may periodically suffer significant losses due to oversimplified trend signals and underdiversified portfolio construction. In this article, the authors show that trend-following strategies with moderate sophistication and better diversification can significantly reduce the downside risk of simple trend-following strategies without sacrificing much upside potential. The authors therefore recommend that investors who seek the benefits of cost-effective trend-following strategies consider adding reasonable complexity to the strategies.TOPICS: Real assets/alternative investments/private equity, futures and forward contracts, portfolio construction, risk management ER -