Karl Rogers, Chief Investment Officer of Elkstone, introduces the “Investment Thoughts from the Road” series to provide insight into alternative investments and trends in the market. In the first article, Rogers defines alternative investments and focuses on trend following as part of the public pillar within his five-pillar investment methodology. The pillars include Private Equity, Private Credit, Real Assets, Uncorrelated Investments, and Liquid Alternatives.
Trend following, as described by Winton, is a systematic investment strategy that aims to profit from price trends, whether they are up or down. In 2024, trend following has shown strong performance with the SocGen Trend Index up 7.64%. Over the years, trend following has proven to be uncorrelated to traditional markets, providing a negative correlation during periods of market stress. For example, in 2022, when equity and bond markets struggled, trend following had a -54.6% correlation to the S&P 500 while returning +25.5%.
Rogers expresses his confidence in trend following as a reliable investment strategy that meets his portfolio’s return requirements. He highlights the importance of trend following being a rules-based strategy that relies solely on price signals, making it adaptable to changing market dynamics. In a time when traditional relationships between assets are shifting, trend following provides a constant strategy that can serve as a counterbalance in a diversified portfolio.
When considering tactical repositioning, Rogers weighs in on arguments for and against increasing exposure to trend following. Some firms suggest increasing allocation due to historical risk premium increases in a higher interest rate environment, while others see trend following as a timely counterbalance to expected market volatility. Rogers emphasizes the need for diversification and the uncorrelated nature of trend following, making it a valuable addition to a portfolio.
In terms of portfolio construction, Rogers advises focusing on pure trend managers to maintain convexity during periods of market stress. While some trend managers diluted their strategy by adding other uncorrelated strategies, Rogers prefers to ride through choppy market conditions with a pure trend strategy. He emphasizes the importance of seeking professional advice for specific investment decisions and cautions against making investment decisions based solely on the information provided.
Overall, Karl Rogers’ insights on trend following and alternative investments offer a valuable perspective on navigating the ever-changing investment landscape. As part of the Forbes Finance Council, Rogers brings a wealth of experience and expertise to help investors understand and incorporate alternative investments into their portfolios effectively. His commitment to demystifying the world of alternative investments and providing practical tips for portfolio construction is a valuable resource for investors looking to diversify their investment strategies.
