The Passive Party Hangover

+ Sir Chris Hohn, Paul Tudor Jones, Thomas Reiner, Morgan Stanley, TCW, & More

Author

The Idea Farm
June 22, 2025

“We use the term risk all too casually, and the term uncertainty all too rarely.”

— John Bogle

Research

Bain says tariff turmoil has held back private equity deals and exits, exacerbating the need to improve liquidity.

This article examines the historical performance of managed futures trend following strategies during significant S&P 500 drawdowns. It states that trend following often struggles or lags during the initial phase of a bear market, but has historically provided significant diversification benefits during the prolonged grind down from -10% to the market trough.

Source: AQR, Societe Generale, Robert Shiller, Yahoo Finance. Used monthly returns from AQR “A Century of Trend Following Investing” from January 1, 1940 to December 31, 1999 and Societe Generale CTA Trend Index monthly returns from January 1, 2000 to March 31, 2025. Scaled the historical AQR trend data to the same arithmetic average monthly return and standard deviation as the live Societe Generale CTA Trend Index. Data prior to January 1st 2000 is SIMULATED AND HYPOTHETICAL RESULTS. S&P 500 TR uses Yahoo Finance ^SP500TR data extended with Dr. Robert Shiller’s S&P 500 extension. As of 4/9/2025.

The tailwinds that led to broad market gains in the past are giving way to volatility, fragmentation and economic divergence. Morgan Stanley shares why they believe active strategies are favorable to passive strategies, which thrived after the long period of low volatility post-GFC.

Nearly half of the opportunities available in fixed income aren’t represented in the Bloomberg U.S. Aggregate Bond Index. TCW suggests using actively managed ETFs as a way to diversify a fixed income portfolio given these limitations.

Source: TCW. 

Bonus Content

Paul Tudor Jones says President Donald Trump will probably appoint an "uber dovish" Federal Reserve Chair to replace Jerome Powell. He also touches on the path of interest rates, Trump's proposed budget, and artificial intelligence (25 minutes). Link

Jeffrey Gundlach talks about the price of gold, monetary and fiscal policy, AI & the bond market (27 minutes). Link

Apollo published outlooks on China, US banks, and credit markets.

Altimeter’s Thomas Reiner provides a data-driven look at cash-versus-equity flexibility—plus the latest Q1 ’25 dilution scoreboard. Link

Source: Altimeter, Company Filings, US Average Hourly Earnings AHE TOTL Index, US Fed Labor Compensation for Software Publishers, US CPI, Bloomberg. As of 6/10/2025.

Podcasts

5/14/2025 - 77 minutes

Sir Chris Hohn, founder of The Children's Investment Fund Management, discusses the critical importance of high barriers to entry in investing, the power of long-term thinking, and how intuition shapes investment decisions.

5/16/2025 - 86 minutes

Chris Davis & John Authers discuss Warren Buffett's Legacy, the future of Berkshire Hathaway, the trade war & more.

5/29/2025 - 78 minutes

The hosts touch on a number of topics, including the love for dividend investing, the FIRE movement, the 4% rule and more.

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