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Trend following’s bumper returns mask fading convexity
Research suggests strategy is no longer a reliable hedge against stock market crashes
![fading figures-919463722.jpg](/sites/default/files/styles/landscape_750_463/public/2022-05/GettyImages-919463722.jpg.webp?itok=kbZRRd7H)
Trend followers are enjoying their best returns ever, but the good times could be masking the strategy’s fading qualities as a tail-risk hedge, according to new research.
An index of leading trend-following strategies run by Societe Generale was up more than 26% year-to-date at the time of writing. And yet a study by $3.4 billion boutique quant firm Versor Investments suggests the strategy has lost its trademark positive convexity to equities over time – a finding that calls into question
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