SG Prime Serves has provided their assessment of trend-following managers over the past 25 years since the inception of their index. There is dispersion in performance, which should be expected since there are many variations in trend-following. The trend indicator, a simple trend model for comparison, shows that the correlation between managers and a generic fund will deviate when there is a strong macro event.
The data suggests that holding just one manager may not be optimal and that a portfolio will reduce the potential for regret. Now, is there a correct number of managers to hold? That is a more difficult question. One is too low, yet 6 may be too many if the trend allocation for an overall portfolio is 2%. That said, a large pension may want to include a trend index and then add some satellite managers who have specialized skills.
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