BO44: How much should I Allocate to Trend Following?

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 26 March 2020

⏱️ 6 minutes

🔗️ Recording | iTunes | RSS

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Summary

What is the perfect allocation percentage to Trend Following, and other assets, in a diversified portfolio?

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Transcript

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0:00.0	Here's a question from Raphael.
0:05.5	He talks about something that was mentioned in episode three.
0:10.0	And he says, if the optimal to have around 50%, so this must be a comment that we made.
0:15.3	And I think maybe it was you, Moritz, or maybe you, Jerry.
0:18.8	It says if it is optimal to have around 50% of your portfolio
0:23.0	in CTA, systematic investor podcast, episode three, what is the optimal remaining allocation?
0:29.7	So anyone who wants to venture into answering this?
0:34.5	Oh, that's a great one.
0:35.8	Yeah.
0:36.1	I remember where that comment came up and why it came up.
0:39.0	I think we spoke about the, you know, optimal allocation of trend following within a diversify
0:45.9	portfolio, say 60, 40 portfolio or something like that.
0:48.6	And we spoke about maybe allocating 10% to trend following managers and concluded that, well, if you've allocated
0:56.9	10%, then really that doesn't move the needle that much, right? So I was saying, well, if you
1:01.5	want to get the benefits of a trend following allocation, the diversification, you know, all those
1:07.9	type of things, then then probably you want to look at a 50% allocation or higher.
1:13.4	Now to your question, I think, why don't people start with trend following?
1:18.4	Why isn't that the base allocation?
1:21.2	So make it 100 if you want, right?
1:24.0	And if you still must add other things, long only equity, credit, I don't know, then do that.
1:32.5	But maybe do it from the kind of like in reverse.
1:35.9	Start with trend following, make that the base, and then see how much you want to reduce that, right?
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