Man Group analyzes equity trend following strategies

Asset manager Man Group PLC has released an in-depth analysis examining the application of trend-following strategies within equity markets. The firm notes that while traditional approaches often focus on index futures, new research explores opportunities to expand these strategies to cover individual stocks and sectors.

Historically, trend following in equities has primarily utilized index futures due to their liquidity and operational simplicity. However, Man Group's research suggests that diversifying into cash equities at a sector or single-stock level can provide access to unique return drivers not captured by broader index strategies.

The analysis indicates that while directional, sector-level trend following has historically yielded positive absolute returns, these strategies often remain correlated with equity index futures trends. This correlation is particularly pronounced during extreme market movements, suggesting limited diversification benefits in such scenarios.

Man Group proposes that cross-sectional strategies applied to sectors and equity styles may offer more diversifying characteristics. These approaches could serve as an effective complement to traditional trend following, potentially enhancing a portfolio's overall risk-adjusted returns.