The Last Crusade

– search for the investment strategy Holy Grail

I am one of those industry veterans who, whilst still having some way to go before retirement age, can boast 30+ years of experience in investment management.  The earliest of those years was spent managing discretionary portfolios totalling some £40m of private client moneys (I am talking the 1970/80s here!).  Although slightly more removed from the coal face these days my interest in the industry search for the Holy Grail of investment strategy remains just as strong as ever.

 The ideal combination of low costs, low charges, competitive performance and minimal drawdowns (reductions in value) has eluded academics and practitioners alike ever since stockmarkets evolved almost two centuries ago.  Index trackers and absolute/hedge funds have been the most recent attempts but both have failed miserably to deliver anything remotely resembling consistent upward-only performance.

After all this time it is pretty clear that the emotional drivers behind efficient stockmarkets, the urge to speculate in shares, means that there isn’t and never will be a formula for achieving consistent stockmarket returns.  However, my study of markets over the last 120 years and more does indicate that markets undoubtedly move in both short and long term trends, normally linked to economic and political factors at play in the global commercial world.  Trend following (and trading strategies through the use of moving averages) has also, therefore, been a feature of investment management for a long time.

It is therefore with great pleasure and amusement that I have discovered that a combination of trend-following and trading triggers, based on moving averages, has now been demonstrated to be the most reliable means of managing a portfolio over the medium to log term – BUT ONLY if all subjective and emotional human input is removed from the management equation!  Extensive research from professors at the City-based Cass Business School has indicated that investment performance is enhanced and volatility reduced by adopting a purely mechanical but entirely logical process to manage investment portfolios.

I am also delighted to add that the practical application of this research has been brought to WAY Fund Managers courtesy of Hasley Investment Managers (and their captive professors from the business school) and is now available to investors via the WAY Hasley Global Momentum Fund.  This fund invests in 24 mature stockmarkets via 14 low-cost ETFs, with each ETF being invested, or not, each month depending on a moving average trigger.  The process means that the fund can be up to a month or more late in joining any particular trend, depending on precisely when it started, but that it tends to fully participate in all long term up-trends and totally avoid all long-term down-trends.  The (back-tested) result shows impressive performance and great risk-aversion.  I can commend it to you as a major core holding for virtually any long term portfolio.

Associated Links:

1 Website: WAY Hasley Global Momentum Fund
2 Website: Cass Business School (City University London)
3 Website: Hasley Investment Management LLP

Paul Wilcox
Chairman & Technical Director, WAY Group
11th May 2011
www.waygroup.co.uk

Posted on 11th May, 2011 | Tags: , , , |
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New fund launch: the WAY Hasley Global Momentum Fund

Today we launched the WAY Hasley Global Momentum Fund, ushering in a new era in fund management dynamics. The WAY Hasley Global Momentum Fund is a global momentum fund investing in developed markets primarily through the medium of Exchange Traded Funds (ETFs). A proprietary trading system based on specific moving averages is employed and the process is mechanical with no judgemental overlay…

1. New fund based on a trend-following momentum process
2. Low management fees through use of Exchange Traded Funds (“ETFs”) and cash
3. Investment decisions driven by academically researched rules
4. Impressive back-tested results

WAY Group and Hasley Investment Management have joined forces with leading academics from London’s prestigious Cass Business School to design and launch the new trend-following Global Momentum Fund on 28th February 2011.

The Fund – which is likely to pave the way for a new type of investment methodology in the UK retail market – is designed to offer exposure to 24 developed equity markets via low-cost Exchange Traded Funds (ETFs).

The Momentum Fund will compare indices with their moving averages on a monthly basis to determine whether investors should stay in a rising market – or move into cash to avoid market falls.

The Fund will invest in equally weighted baskets of developed world equities, but will move into cash if sell signals flash red.

“When an index goes through the moving average at the bottom, it comes out of equities, and when it’s above, it stays in,” said Professor Andrew Clare of Cass, originator of the ‘rules-based approach’, along with colleague Professor Steve Thomas.

Back-testing for the Fund has determined that it should be able to match or beat a long-term buy-and-hold strategy, yet with two-thirds of the volatility.

“In a test from 2001 to 2010, the strategy achieved a compound annual return of 6.6 per cent with 9.6 per cent annualised volatility, compared with a 1.9 per cent compound annual return with 16.6 per cent volatility from the MSCI World index,” added Professor Clare.

Investors have long struggled to find funds which consistently beat the index and this has led many toward buy-and hold (or passive) funds which can be bought at a more modest price. The difficulty here is that such funds will follow markets down as well as up and this fund will look to perceptively reduce this negative trait.

Eddie O’ Gorman, of The WAY Group, said that the Fund is the first step in a series of launches likely to alter the UK investment landscape.

“There are some outstanding creative investment opportunities out there, and with this powerhouse of academic research as a dynamic driving force behind WAY/Hasley investment protocols, we believe investors will genuinely be provided with something fresh and beneficial to begin 2011.”

References:
Data & Statistics: WAY Group Limited, Hasley Investment Management LLP

Footnote:

  1. Professor Steve Thomas is a graduate of LSE and Southampton Universities in Economics and Econometrics and has published extensively in international research journals for over 25 years. He was recently ranked 11th in Europe for finance research since 1990. He has been a finance professor at the University of Wales and Southampton University prior to joining Cass, and a Visiting Professor at Queens University, Canada, and the ICMA Centre, Reading University, UK. In 1990 he was the Houblon-Norman Fellow at the Bank of England. For over 20 years he has been editor of Interactive Data’s (formerly FT) credit rating publications; he has extensive experience in professional education and training in all areas of economics and finance for banks and related institutions and is an examiner for the Investment Management Certificate of UK SIP.
  2. Professor Andrew Clare is the Professor of Asset Management at Cass Business School and the Associate Dean responsible for Cass’s MSc programme, which is the largest in Europe. He is also the co-founder and chairman of Fathom Consulting, a leading London-based economic and financial market consultancy. He was a Senior Research Manager in the Monetary Analysis wing of the Bank of England which supported the work of the Monetary Policy Committee. While at the Bank Andrew was responsible for equity market and derivatives research. Andrew also spent three years working as the Financial Economist for Legal and General Investment Management (LGIM), where he was responsible for the group’s investment process and where he developed LGIM’s initial Liability Driven Investment offering. He has published extensively in both academic and practitioner journals on a wide range of economic and financial market issues. In a recent survey Andrew was ranked as the world’s ninth most prolific finance author of the past fifty years. Andrew has also recently been appointed to the investment committee of the GEC Marconi pension plan; this committee oversees the investments and investment strategy of this £3.2bn scheme.
  3. Located in the heart of London’s financial district, Cass Business School is a leading provider of business and management education. Its MBA is recognised globally as a market leader, and Cass has the widest portfolio of Specialist Masters programmes (MSc) in Europe; its Undergraduate School is one of the best in the UK. It is ranked in the UK’s top 10 business and management research schools.

Associated Links:

1 Website: WAY Hasley Global Momentum Fund

2 Website: Cass Business School (City University London)

3 Website: Hasley Investment Management LLP

Paul Wilcox,
Chairman & Technical Director, WAY Group
28th February 2011
www.waygroup.co.uk

Posted on 28th February, 2011 | Tags: , , |
Comments: 4 Comments

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