Trend Following (Time-Series Momentum)

Managed-futures funds have run one core engine for decades, and unusually, they published it: if an asset's trailing return over roughly the last year is positive, hold it long; if negative, stand aside or go short — with each position scaled inversely to its volatility. The canonical academic write-up (Moskowitz, Ooi and Pedersen, 2012) and the long-horizon replication (AQR's century study) put the rules, the evidence and the caveats in the open. The method's core bet: markets underreact first and herd later, so trends persist longer than efficient prices should allow.

Why it matters now: trend is the classic complement to a concentrated long book — it tends to earn its keep exactly in the extended sell-offs that hurt buy-and-hold most, which is why the industry calls the payoff profile crisis alpha. For an AI-heavy portfolio, that convexity is worth understanding even if you never run the system.

The working use is twofold. As a lens: the 12-month sign on your own holdings is a one-line regime check — fighting a negative trend is a choice you should at least make consciously. As a system: the pack's backtester runs the full mechanical rulebook on any price series you feed it, so you can see the smile, the whipsaw years and the drawdown profile on your own data before believing anything. The mistake the method prevents is structural: riding a broken trend all the way down because conviction outvoted the tape.