Candriam Diversified Futures

The Candriam Diversified Futures strategy implements a medium term trend-following approach, accounting for 70% of the strategy, with the remainder allocated to mean-reverting and pattern recognition models (15% each). These additional models are applied only to equities, aiming to enhance convexity. The strategy universe is 36 of the most liquid futures contracts across four sectors: equity indices, government bonds, interest rates, and currencies. Commodities were removed (at the strategy level) in 2014 due to the difficulty in trading and their additional costs, despite their potential for idiosyncratic alpha. The resulting allocation process is selective, with the programme generally trading fewer open positions than peers, which in turn limits unnecessary portfolio turnover across markets that are driven by the same ‘factor’. At the asset class level risks are equally split, supported by a risk budgeting and volatility weighting algorithm to maintain diversification and optimize position sizing. The strategy also targets having more convexity compared to peers during market drawdowns, which is down to the strategy stable exposure to interest rates and government bonds (safe-haven assets in such circumstances). The average speed of trend following is 1-3 months, with daily adjustments made based on risk allocation models. The overall portfolio targets a volatility of around 10%.