DUNN Capital argues that true “alternative” strategies should diversify by timing—delivering negative correlation, positive skew, and convexity when equities sell off. Using index histories since 2000, the paper shows high-volatility trend following provided the strongest crisis offset and improved a 60/40 portfolio’s risk-adjusted profile despite lower standalone Sharpe ratios.
High-Vol Trend Following – The Most Valuable Alternative Investment?
DUNN Capital Management
Research
13 Pages
Key Takeaways
Crisis outperformance: SG Trend 2X returned +112%, +41%, +3%, and +78% across the 2000–02, 2008–09, 2020, and 2022 selloffs.
Distinct return timing: Only trend showed negative equity correlation with positive skew and convexity over 2000–2025.
Portfolio improvement: Adding 20% SG Trend cut max drawdown to −22% (−20% with 2X) versus −31% for a 60/40.
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