What are the key takeaways from this The Meb Faber Show episode?

Key insights include: **Drawdown timing patterns:** Managed futures drawdowns typically occur during strong equity markets, but recover fastest during equity turbulence. The 2019-2021 trade war period represented the longest and deepest drawdown, followed by exceptional 2022 performance during bond market trends.; **Rebalancing advantage:** Institutions successfully rebalance into managed futures during drawdowns and take profits after strong performance like 2022. This disciplined approach outperforms attempting to time strategy entries and exits, particularly given the cyclical nature of trend following returns.; **Portfolio allocation framework:** Managed futures show slightly negative correlation to equities over 25 years, providing premier diversification with positive expected returns. Unlike tail risk strategies that function as insurance costs, trend following offers crisis alpha while maintaining long-term profitability across macro themes.

What did Kathryn Kaminski discuss on The Meb Faber Show?

Kathryn Kaminski explains managed futures drawdowns during 2025 market turbulence, analyzing historical patterns showing second-worst drawdown since index inception, recovery dynamics during equity stress, and why Liberation Day shocks create challenging whipsaw conditions for trend followers. Key topics include: **Drawdown timing patterns:** Managed futures drawdowns typically occur during strong equity markets, but recover fastest during equity turbulence. The 2019-2021 trade war period represented the longest and deepest drawdown, followed by exceptional 2022 performance during bond market trends.; **Rebalancing advantage:** Institutions successfully rebalance into managed futures during drawdowns and take profits after strong performance like 2022. This disciplined approach outperforms attempting to time strategy entries and exits, particularly given the cyclical nature of trend following returns..

How long is this episode of The Meb Faber Show?

This episode is 40 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

The Meb Faber Show

Kathryn Kaminski - Don’t Fire Your Diversifier | #604

October 31, 2025

40 min episode · 2 min read

Kathryn Kaminski

Episode

40 min

Read time

2 min

Topics

Health & Wellness, Investing, Fundraising & VC

AI-Generated Summary

Published Dec 30, 2025

Key Takeaways

✓Drawdown timing patterns: Managed futures drawdowns typically occur during strong equity markets, but recover fastest during equity turbulence. The 2019-2021 trade war period represented the longest and deepest drawdown, followed by exceptional 2022 performance during bond market trends.
✓Rebalancing advantage: Institutions successfully rebalance into managed futures during drawdowns and take profits after strong performance like 2022. This disciplined approach outperforms attempting to time strategy entries and exits, particularly given the cyclical nature of trend following returns.
✓Portfolio allocation framework: Managed futures show slightly negative correlation to equities over 25 years, providing premier diversification with positive expected returns. Unlike tail risk strategies that function as insurance costs, trend following offers crisis alpha while maintaining long-term profitability across macro themes.
✓Trend extension profits: The largest profits in trend following come from extended moves beyond fundamental valuations, not initial trend formations. The 2014 oil collapse and current gold rally above 4000 demonstrate how trends persist far beyond rational expectations when following systematic signals.

What It Covers

Kathryn Kaminski explains managed futures drawdowns during 2025 market turbulence, analyzing historical patterns showing second-worst drawdown since index inception, recovery dynamics during equity stress, and why Liberation Day shocks create challenging whipsaw conditions for trend followers.

Key Questions Answered

•Drawdown timing patterns: Managed futures drawdowns typically occur during strong equity markets, but recover fastest during equity turbulence. The 2019-2021 trade war period represented the longest and deepest drawdown, followed by exceptional 2022 performance during bond market trends.
•Rebalancing advantage: Institutions successfully rebalance into managed futures during drawdowns and take profits after strong performance like 2022. This disciplined approach outperforms attempting to time strategy entries and exits, particularly given the cyclical nature of trend following returns.
•Portfolio allocation framework: Managed futures show slightly negative correlation to equities over 25 years, providing premier diversification with positive expected returns. Unlike tail risk strategies that function as insurance costs, trend following offers crisis alpha while maintaining long-term profitability across macro themes.
•Trend extension profits: The largest profits in trend following come from extended moves beyond fundamental valuations, not initial trend formations. The 2014 oil collapse and current gold rally above 4000 demonstrate how trends persist far beyond rational expectations when following systematic signals.

Notable Moment

Kaminski reveals that the second-worst managed futures drawdown occurred in 2025 following Liberation Day, when coordinated market selloffs and massive volatility reversals created turbulence conditions. The worst drawdown spanned 2019-2021 during trade war volatility before the exceptional 2022 recovery.

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Episode Transcript

Welcome to the Meb Faber show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here. Matt Faber is the cofounder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com. Welcome back, everybody. Today's guest is Catherine Kaminski, chief research strategist at Alpha Simplex, where she's also co portfolio manager for the firm's manage future strategy, global alternative strategy. She also coauthored the book, trend following with managed futures, the search for crisis alpha. It's not her first time on the show. She was first on back in May 2021, episode three ten. You can check the notes in the show notes for the link. Katie, welcome back to the show. Thanks for having me. Fun to be here. I almost feel like other than gold going to 10, this is almost a little bit of, like, a glass half empty. Someone I heard the other day, someone always talks about glass half empty, half full, and they said, you know, my glass is refillable. I said, that's a good way to think about it. But talking about managed futures this past year, maybe a little bit better last few months, but it went through a rough patch. Let's just get it out of the way early. What happened? What's going on in our our trend following world? I think the thing is, like, we have to acknowledge that we experienced what would be sort of a massive shock to markets on Liberation Day, which basically was a precursor to the markets that things are changing. Like, you know, trade policy is gonna change. Diplomatic relations are changing. Everything's changing. And the markets really just went crazy. Right? And so in that environment, the real macro change is coming, but it's more just like, what does it mean? And I think when you're dealing with a technical strategy, that is sort of your Armageddon. It's just massive moves, lack of direction, reversals, panic. And so I think for us, those are what I call, like, turbulence days where, basically, you have coordinated market sell offs. You have a lot of vol. You don't have trend. But, eventually, the trends come back. And so that is sort of how I think about what's happened this year. The shock and then the aftershocks. Alright. What's the premier index? Is it SocGen? Is that the one we all talk about? Yeah. The SocGen CTA and the SocGen trend index are the most common commonly cited examples to understand how managed futures and or trend following is performing. And most investors the challenge …

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