Man Group PLC analysis explores optimal market mix for trend-following strategies

Man Group PLC, a leading global asset manager, has published in-depth research focusing on the optimal market mix for trend-following investment strategies. The study, aimed at institutional investors, tackles a fundamental question: how should investors allocate capital across various markets to achieve the best risk-adjusted returns and crisis performance.

The analysis concludes that no single market mix is universally optimal. Investors prioritizing defensiveness and protection during crises should favor traditional markets. Conversely, those focused on maximizing long-term returns may benefit from overweighting alternative markets. Man Group emphasizes that allocations should be tailored to individual investor objectives.

The research highlights that traditional trend-following markets, such as equity indices, government bonds, currencies, and commodities, offer positive expected returns and a degree of crisis protection. These markets are typically liquid and transparent. However, the study notes that many traditional asset classes share similar underlying return drivers, potentially causing them to fall together during economic downturns, thus diminishing diversification benefits when most needed.

Trend-following strategies, distinct from traditional assets, do not rely on economic growth and have historically shown low correlation with other asset classes. They have often demonstrated positive performance during periods when traditional markets struggle, providing a valuable counterbalance. Man Group's analysis offers investors insights into constructing trend-following portfolios optimized for either maximum return or maximum crisis resilience.