Managed Futures: Fast & Furious vs Slow & Steady

Short vs long-term trend followers

May 2021. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Managed futures strategies aim to exploit short- or long-term trends
  • Short-term trend followers are often seen as offering better stock market crash protection characteristics
  • Our analysis highlights that the differences are marginal


Aesop’s famous story of the race between the tortoise and the hare was put up to a test in 2016 when researchers made them compete with each other in real life. To the surprise of the live audience, the tortoise won indeed each time, just like in the fable. The hare was quicker out of the gate, but rarely finished the race and was overtaken by the tortoise that continued at its steady pace.

Taking it a step further, Professor Bejan from Duke University published an article in the journal Scientific Reports in 2018 that showed that some of the fastest animals based on land, water, or air, are actually the slowest ones if their movements are averaged across their lifetimes. It is all about being able to be fast when required, which for animals means when hunting prey or fleeing from predators.

In the investment world speed also matters immensely. Most investors have equity-centric portfolios that are negatively skewed. Gains come slow and steady, but losses fast and furious. Given that most investors deal poorly with losses, portfolio diversification is essential.

One of the popular strategies for diversifying traditional portfolios is managed futures, which are also called trend followers or commodity trading advisors (CTAs). The strategy is to go long or short trending instruments across all asset classes, which results in a diversified portfolio of futures that typically has a low correlation to equities. 

However, trends can be measured over various time frames. As transaction costs have reduced over time, some managers have started exploiting short-term trends. A frequent argument for this trading style is that the portfolio adapts more quickly to changing market conditions, which can be highly valuable when stock markets crash.

In this research note, we will contrast long-term to short-term managed futures strategies from the perspective of diversifying an equity portfolio.