Key Takeaways
- • Trend following operates as a diversified portfolio strategy across multiple markets rather than as a single-market tactical approach, requiring simultaneous exposure to a large number of independent bets to function effectively as an institutional investment strategy.
- • Andreas Clenow, CIO of ACIES Asset Management AG, emphasizes risk management and position sizing as foundational to trend-following implementation, with the strategy's success dependent on careful calibration of capital allocation across uncorrelated market exposures.
- • Return expectations and compounding dynamics require realistic assessment in trend-following strategies, with Clenow and Faber discussing the gap between theoretical optimization and practical portfolio management in managed futures.
- • Clenow's approach has evolved from pure technical analysis toward recognizing trend following as a strategic business model, reflecting broader shifts in how alternative managers conceptualize systematic trading within institutional frameworks.
Summary
Andreas Clenow, Chief Investment Officer of ACIES Asset Management AG, discusses the fundamental mechanics of trend-following strategies in an episode of Meb Faber's research podcast recorded on October 28, 2019. Clenow brings extensive experience in systematic trading and quantitative analysis, having previously served as Global Head of Institutional Charting and Technical Analysis at Reuters Consulting and authored multiple books on trend-following and momentum strategies, including *Following the Trend: Diversified Managed Futures Trading* and *Stocks on the Move: Beating the Market with Hedge Fund Momentum Strategies*.
The central thesis of the conversation centers on a critical distinction in trend-following implementation: the strategy functions optimally as a portfolio-level approach rather than as a single-market tactic. Clenow articulates that trend following fundamentally operates through "taking a lot of bets on a very large number of markets" independently, emphasizing the importance of diversification across uncorrelated asset classes as the core structural requirement for the strategy's efficacy. This portfolio-based framework differentiates institutional trend-following programs from retail or single-market applications.
Risk management emerges as a primary focus of the discussion, with Clenow detailing his framework for thinking about portfolio risk and position sizing within trend-following strategies. The conversation between Clenow and Faber explores the tension between theoretical optimization and practical implementation, examining realistic return expectations and the mathematical realities of compounding within managed futures allocations. This reflects institutional investors' ongoing challenge of reconciling quantitatively attractive backtests with forward-looking performance assumptions.
Clenow identifies a significant evolution in his strategic approach over time, moving beyond pure technical analysis toward a broader conceptualization of trend following as both a strategic philosophy and a business model. He acknowledges that the business infrastructure and operational realities of managing alternative funds have substantially changed, requiring modern managers to balance systematic rigor with pragmatic operational considerations in serving institutional and qualified investor bases.
The central thesis of the conversation centers on a critical distinction in trend-following implementation: the strategy functions optimally as a portfolio-level approach rather than as a single-market tactic. Clenow articulates that trend following fundamentally operates through "taking a lot of bets on a very large number of markets" independently, emphasizing the importance of diversification across uncorrelated asset classes as the core structural requirement for the strategy's efficacy. This portfolio-based framework differentiates institutional trend-following programs from retail or single-market applications.
Risk management emerges as a primary focus of the discussion, with Clenow detailing his framework for thinking about portfolio risk and position sizing within trend-following strategies. The conversation between Clenow and Faber explores the tension between theoretical optimization and practical implementation, examining realistic return expectations and the mathematical realities of compounding within managed futures allocations. This reflects institutional investors' ongoing challenge of reconciling quantitatively attractive backtests with forward-looking performance assumptions.
Clenow identifies a significant evolution in his strategic approach over time, moving beyond pure technical analysis toward a broader conceptualization of trend following as both a strategic philosophy and a business model. He acknowledges that the business infrastructure and operational realities of managing alternative funds have substantially changed, requiring modern managers to balance systematic rigor with pragmatic operational considerations in serving institutional and qualified investor bases.
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