“Research never stops,” as managers are looking to add trading tools to their heritage of pure trend-following. In addition to the core strategies of long-term trend-following, managers are diversifying by adding shorter-term models that may catch different portions of the trend in a given market. Countertrend models are increasing, as are the use of inventory data in commodities and carry strategies in currency markets.
Dew further explains how institutional investors differ from individual investors. Historically, individuals have had shorter-term relationships with their CTAs, often choosing to redeem after drawdowns and add to allocations after times of strong performance, which has reduced their and returns relative to the buy-and-hold investor. Institutional investors tend to commit funds for longer holding periods, seeking to earn performance over the manager’s full return cycle.