Investment News & Views

Guardian Trend Following in Turbulent Times: How it has performed and what we have learnt

The coronavirus has completely upended life and work over the past year to put it mildly. As a company, we moved to make changes and learn from the rapidly transforming investment landscape. We seamlessly moved to work from home and made changes in the way we operate and manage our portfolios.

Our trend-following strategies quickly signalled an exit out of equity markets at the end of February and in early March confirming their ability to time market falls. It soon became apparent that bond markets were also suffering losses as confidence faltered and we therefore started monitoring our bond and alternative asset allocations with trend following as well. We also changed our strategy to move to the next safest investment from equities and bonds to 100% cash when necessary.

We realised that re-entering markets would require a modification to our trend-following strategy to move to shorter durations. The sudden and steep drop in market values skewed longer duration trend-following strategies with high averages which would not be applicable to the new lower values. Using the same long durations to signal a re-entry to markets would not have been appropriate and would not have signalled a return in a timely fashion. Due to this mathematical conundrum, we made two changes: a change to shorter durations to be able to appropriately identity the start of an upward trend and to also include a wider range of moving averages and crossovers to better judge trends within the trend-following signals. Previously, we used 3 durations for our trend-following approach and have continued to also review these durations on top of the larger ranges.

Originally our investment committee meetings were monthly, but as we saw the first wave of the coronavirus appearing, we moved our investment committee meeting forward to respond swiftly. At the height of the market volatility, our committee met weekly. We now meet fortnightly or more frequently if necessary.

We continue to review the trend-following signals for all our funds every week and have recently reviewed our funds to ensure we continue to keep to our core Guardian principles to invest in unit trusts for each sector with low ongoing and transaction costs, while minimising volatility and capturing performance.

To find out more about how we have performed, download the Guardian Q1 Review.

Guardian Performance Review

Guardian Performance Review

This review covers the quarter until the 1 April 2021. Our Guardian portfolios have performed well in the recent volatile markets.

Performance Update and Review

  • Wednesday, May 5, 2021

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author

Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.