October 27, 2022

A DoubleLine Trend-Following Strategy for Portfolio Diversification

In a research paper published Oct. 27, 2022, DoubleLine Deputy Chief Investment Officer Jeffrey Sherman and Quantitative Analyst Eric Dhall explore the theory of market-return momentum and the applied results of trend-following indexes. Then they introduce the DoubleLine Multi-Asset Trend Strategy. “Crowd psychology and pricing dynamics create observable momentum in returns, prices tending to continue in one direction until a catalyst shifts sentiment,” Messrs. Sherman and Dhall write. In their paper, they “explore the performance, benefits and limitations of actual trend-following indexes and the academic case for a positive momentum risk premium that the algorithms driving these indexes seek to capture. Then we will present the DoubleLine Multi-Asset Trend Strategy, which we believe offers a superior trend-exposure solution.” The DoubleLine Multi-Asset Trend Strategy is a turnkey solution offering what DoubleLine thinks is a superior trend exposure along with enhanced collateral management at a competitive price. By simultaneously providing exposure to the BNP Paribas Multi-Asset Trend Index (accessed through a swap contract) and a portfolio of fixed income securities with low interest-rate risk, investors obtain trend exposure and an incremental income stream in their portfolio.

About the Authors

About the Authors

  • Jeffrey Sherman, CFA

    Jeffrey Sherman, CFA

    As DoubleLine’s Deputy Chief Investment Officer, Jeffrey Sherman oversees and administers DoubleLine’s Investment Management sub-committee coordinating and implementing policies and processes across the investment teams. He also serves as lead portfolio manager for multi-sector and derivative-based strategies. Mr. Sherman is a member of DoubleLine’s Executive Management and Fixed Income Asset Allocation Committees. He can be heard regularly on his podcast “The Sherman Show” (Twitter @ShermanShowPod, where he interviews distinguished guests, giving listeners insight into DoubleLine’s current views. In 2018, Money Management Executive named Jeffrey Sherman as one of “10 Fund Managers to Watch” in its yearly special report. Prior to joining DoubleLine in 2009, Mr. Sherman was a Senior Vice President at TCW where he worked as a portfolio manager and quantitative analyst focused on fixed income and real-asset portfolios. He was a statistics and mathematics instructor at both the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the CFA LA/USC Review Program for many years. He holds a B.S. in Applied Mathematics from the University of the Pacific and an M.S. in Financial Engineering from the Claremont Graduate University. Mr. Sherman is a CFA® charterholder.