The bear trend of March 2020 was unprecedented though, as we just discussed, in terms of speed. The extreme volatility and the unexpected severity of the losses exposed how inadequate most of the traditional, old-school methodologies, including the over-reliance on fundamentals and analysts, as many portfolios could not mitigate the damage. It is time to face this reality.
Hortz: How do these new investment tools help you limit the damage when a market crash strikes? Can it help warn investors?
Pellegrinelli: Advanced analytics and new generation price trend models are commercially available to provide such an edge. But let me point out that, besides downside protection, they also can help to quickly identify and capture those positive trends that will emerge in very selective ways across sectors, independently from what the indices will do. It is time to incorporate alternative data, advanced analytics and price trend models in the investment decision process that can change the game.
By way of example, here is a link to a sample track record of the actual analytics that our investment clients recently received. The robust downgrade from our price trend analytics tool to a “C“ rating across world indices alerted our customers to the start of a bear trend.
Hortz: What other benefits are there for active managers in embracing these tools?
Pellegrinelli: Active managers, using all the available modern tools, have a fair chance to fight back and recoup credibility as protectors of capital, creators of value, and gain back a good part of the assets that went to passive products over the last five years. Active managers now can fight back against passive products, after years of increasing market share losses. But, fundamental analysis and subjective valuations are not enough. They will have to realize that to deliver value they will need to incorporate intelligent, proven and fast “trend capture” methodologies that can add an extra level of sound risk control and quick validation of investment ideas.
Hortz: Any final thoughts or recommendations to share with advisors and asset managers?
Pellegrinelli: Steve Jobs once stated that “innovation is the only way to win.” I apply that for many active managers as “innovation is the only way to survive and prosper.” The enemies of innovation, and our relentless search of excellence in what we do for our clients, are skepticism and inertia, which only protects the status quo. It is time to adopt data and analytics of a new generation.
New analytic models help to double-check opinions, react quickly to changed conditions, and provide guidance during times of extreme confusion and uncertainty. Trendrating provides critical market intelligence via a unique methodology to “rate trends“ that fills a critical market intelligence gap and is now part of the investment decision process at more than 100 premier institutions in the asset and wealth management industry. We welcome you to explore and follow some of our research and white papers on our website to learn more about price trend capture intelligence and its applications for your investment strategy.
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