More Opportunities or Better Opportunities
The diversifying properties of systematic trend following strategies are well-understood. But in generating those diversifying returns, the strategy itself relies on having a diversified set of underlying markets and opportunities in which to trade. Therefore, trend following managers aim to maximise the diversification available to their strategies, and there is a growing set of products focusing on trading more obscure and harder-to-access markets. In this research, we analyse the performance and diversification of trend following across different market types and liquidity profiles, considering both traditional futures, and the more esoteric and harder-to-access markets being traded in more specialised products. Is there any kind of liquidity premium or novelty premium which makes these markets more suited for trend following? Or are they just different? We show that there is no evidence of superior trend following performance in individual harder-to-access markets. However, less-traditional markets have offered better diversification and are therefore compelling additions to a trend following portfolio.