• Managed Futures for Uncorrelated Returns  

    Managed futures have had a tough 10 years, but they gained much of their glory during the financial crisis as the category was up double digits in 2008 and stocks were down 30% or more. While there were investors who had been in the strategy prior, many joined after seeing that performance and decided to use it as a ‘hedge’ for their portfolio. While we hadn’t experienced any negative years for equities since 2009 (S&P 500 Index), 2018 came along and the long-awaited hedge provided by managed futures delivered what?

  • Top 5 Reads of the Week | 361 Capital Blog  

    Our favorite reads of the week and the quotes that make them worthy…

    “The origin stories of big ideas, whether in math or any other field, generally highlight the eureka moments. You can’t really blame the storytellers. It’s not so exciting to read “and then she studied some more.” But this arduous, mundane work is a key part of the process; without it, the story is just a myth. There’s no way to skip the worrying phase.

  • Is Portfolio Diversification Dead?  

    In a recent article, Morgan Stanley cautioned investors that returns on a traditional 60/40 portfolio “could slide to century lows over the next decade”. This warning highlights the importance of diversification in the traditional 60% stock/40% bond portfolio. While the algorithms underpinning managed futures strategies may be complex, the strategy’s purpose is simple. In a single word: diversification.

  • Top 5 Reads of the Week | 361 Capital Blog  

    Our favorite reads of the week and the quotes that make them worthy…

    “However, much like the bankers of the early 21st century, we risk allowing new incentives to erode our self-regulation and skew our perceptions and behavior; similar to the risky loans underlying mortgage-backed securities, faulty scientific observations can form a bubble and an unstable edifice.

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    We often talk about factor returns as a single percentage, similar to a broad index return. The measures are helpful to get a quick understanding, but do not reveal much about the underlying dynamics. A factor’s return (also called a spread) is derived by the difference in returns of the top-ranked stocks and the bottom-ranked. This is done by quantizing the stocks into equal groups of similar rankings, based on a certain metric. Deciles, quintiles, or quartiles are popular to use. A decile spread is the average return of stocks in the top decile (D1) subtracted by the average return of stocks in the bottom decile (D10).