Trend Following

The Raisons d'être of Managed Futures

Managed Futures strategies have an implicit dual mandate, First, to deliver positive returns on average and second, to generate especially attractive returns during large equity market drawdowns. This is one of the big reasons managed futures strategies can be valuable in a portfolio. Unfortunately, by and large, the industry—intentionally or not—has been optimizing for one at the expense of the other by introducing carry and market beta exposure.

Value

Is Value Just an Interest Rate Bet?

It seems obvious to so many that interest rates drive the value trade. After all, growth stocks have much longer-dated cash flows than value stocks and thus should be a “longer duration” asset and move more with longer-term interest rates, right? This is taken as an axiomatic given in countless pundit and press observations. However, it’s not nearly that simple, and mostly it’s just not true.

Value

We Are Not Just Value! Except, You Know, When We Are...

Our systematic stock selection process is far from just “value.” And yet from 2018-2020 for the bad and 2021-2022 for the good, our world has indeed been all about value. What gives? This post reviews our correlation to value, delving into a few periods when it became the dominant part of our process. We find that when value dominates, it has usually been in bubble periods of irrational losses for value (and in their more pleasant aftermaths).

Alternative Investing

Building a Better Commodities Portfolio

Interest in commodities is rising again, thanks to their tendency to be particularly strong diversifiers during periods of rising or volatile inflation. We review what a “best-in-class” commodity portfolio looks like by exploring three potential enhancements to a passive approach to the asset class.

Tax Aware

Can Your Loss-Harvesting Strategy Still Harvest Losses?

As equity portfolios appreciate over time, opportunities to harvest losses become few and far between. Whether you’ve been invested in a passive equity portfolio or in a Direct Indexing strategy, you’ve likely found that harvesting losses was much easier in the first few years after inception. Beyond that, not only does harvesting losses become a challenge but even keeping up with index reconstitutions might be difficult without recognizing capital gains. Appreciated portfolios—once a benefit—become a liability later in their life-cycle.

Alternative Investing

Time to Diversify – But into What?

The last 10 years were exceptional for traditional stock/bond portfolios. But with stock market valuations near all-time highs and bond yields near all-time lows, prospective returns look bleak. We make the case for diversifying out of equities and explain the valuable role liquid alternative strategies can play.

Tax Aware

Why You Might Defer Your Gains, Even When Tax Rates Are About to Increase

With the current proposals for (and the future expectations of) various tax rate hikes, investors with appreciated portfolios might feel like sailing into a storm and wondering, is it still better to defer gains if tax rates were to increase?

Macroeconomics

Inflation Outlook: the Macro, the Micro, the Transitory

Financial markets have had a relatively muted reaction to the recent bout of higher than expected inflation. We assess what might explain markets’ sanguine response. We explain why we believe there are factors suggesting a return to low inflation readings is unlikely in the near term, and what the investment implications might be of such a scenario.

Tax Matters

All Is Not Lost: Trader Fund Losses under the CARES Act

Hedge funds are commonly perceived as investments that allocate large amounts of taxable capital gains and income to their investors. But what if a hedge fund realizes a taxable loss? Under the new rules in the TCJA and the CARES Act, can hedge fund investors still benefit from tax offsets offered by realized losses and deductions—and to what extent?

Tax Aware

The Value of Integrating Income and Estate Planning

In this post, we discuss challenges of wealth preservation and growth faced by high net worth families. While a family that invests with income tax and estate tax efficiency in mind is more likely to achieve its financial legacy goals, the numerical advantages of tax efficiency are quite striking. In addition, we show that there is a significant value in integrating income tax efficiency and estate tax planning.