Patriarch optimizes trend following model | Products | December 24, 2020


The Frankfurt fund initiator Patriarch Multi-Manager has revised its “Trend 200” timing concept. New anti-cyclical thresholds are intended to prevent investors from losing money due to the massive market fluctuations that occur more and more frequently.

Patriarch managing director Dirk Fischer

© Patriarch Multi-Manager

The Frankfurt product forge Patriarch Multi-Manager has improved the trend-following systems of its portfolios and its fund asset management (Fonds-VV). According to their own statements, the fund initiators have provided the “Trend 200 approaches” with an anti-cyclical component in order to take account of the strongly changed stock market developments. “We use trend following for our customers to reduce risk with a clear view of the long market trends”, explains Patriarch Managing Director Dirk Fischer. “Trend followers can work well with such long trends and then derive the right leading indicators from them in order to position the customers correctly. This worked for decades to the full satisfaction of all customers.”

In the recent past, however, there has been an accumulation of rapid downward movements on the stock markets, which have then been seamlessly replaced by equally dynamic, steep and short-term upward movements – so-called V-price movements. A good example is the price development in the course of the corona pandemic. “Such trends are difficult to grasp for trend followers, as they are not of a long-term nature, and carry the risk of a late exit from the falling market, as well as that of a potentially late entry into the rising market,” explains Fischer.

200 day line
With the Trend 200 strategies, Patriarch and his product partners rely on technical chart signals. The 200-day line provides the impetus for investment decisions: if the trends were positive, the respective product has previously invested 100 percent in shares. If the trends were negative and were below the 200-day line, a switch was made to bond and money market products. In the course of the revision, different upper and lower anti-cyclical thresholds were installed depending on the risk profile of a product.

If the first upper anti-cyclical threshold is reached in a hot bull market, an equity quota of 25 percent will be reduced immediately. When the second upper threshold is reached, it is another 25 percent. In contrast to the old, pure trend-following approach, profits that have already been made are secured in good time and not wiped out again in a falling market.

Building stock positions
When the first lower anti-cyclical threshold is reached, on the other hand, in an “oversold” market, a first 25 percent equity quota is built up countercyclically from a 100 percent cash position against the trend. If the market level is even reduced to the second lower anti-cyclical threshold, another 25 percent equity quota will be bought. “With the combination of trend following and anti-cyclicals, Patriarch has combined the best of two worlds for the benefit of customers and at the same time created a powerful and understandable solution for the challenges of capital investments today,” says Markus Kaiser, the advisor of all trend 200 ETF strategies from Patriarch. (jb)

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