September 2018 IssueLong scroll reading


By Charles Boccadoro

We’ve added Trend Metrics to the MultiSearch tool on MFO’s Premium site.

Trend Metrics signal when funds are performing above or below their 3- and 10-month simple moving averages (SMAs). If the Trend Metric is positive, the strategy suggests staying invested. If negative, exiting the position. The strategy has proved effective at mitigating severe drawdown, especially during periods of longer term trends, like experienced during the financial crisis of 2008.

The seminal paper on trend following is Mebane Faber’s “A Quantitative Approach To Tactical Asset Allocation,” which is the most downloaded paper by far on the Social Science Research Network (SSRN) as of August 2018.

You might also see “Method Performance Over Ten Decades” and “10 mo SMA Method In Down Markets.”

As of month ending August, nearly all of the 3270 US Equity funds are trending positive, 3121 in fact had 3- and 10-month returns above their respective averages. Similarly, 132 of Lipper’s 168 fund categories are trending positive, exceptions are some commodities and international funds. Most International Equity funds have been underwater the past 7 months, but trend indicates a few, like FMI International (FMIJX), are be trending up.

Below please find past year metrics for a sampling of international funds in some notable families. The values of SMA are based absolute month ending total returns, which include dividends, and are in units of percentage, %. The values of Trend represent 3- and 10-month fund performance relative to their respective SMAs, and are also in units of percentage, %. They are highlighted in blue if positive and red if negative.

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About Charles Boccadoro

Charles Boccadoro, BS (MIT), Post Graduate Diploma (von Karman Institute, BELGIUM). Associate editor, data wizard. Described by Popular Science as “enthusiastic, voluble and nattily-dressed,” Charles describes himself as “a recently retired aerospace engineer.” He doesn’t brag about a 30 year career that included managing Northrop Grumman’s Quiet Supersonic Platform and Future Strike Systems projects, working with NASA and receiving a host of industry accolades. Charles is renowned for thoughtful, data-rich analyses and is the driving force behind the Observer’s fund ratings and fund screeners.