We've always been a fan of Kathryn Kaminsky's work, and she's got an interesting piece out in Pensions and Investments deconstructing what has become a bit of an overused buzz word - crisis alpha. Turns out, there's more than just the S&P 500 out there, and there are investors worried about more than just a US stock market "crisis." Take 2014's energy market meltdown, for example; which was every bit as big of a crisis for those in the energy space as 2008 was for others.
Here's Katherine's take:
…for the global investor, crisis is not a simple one-dimensional problem but a multiasset phenomenon. From a multiasset perspective, crisis is everywhere."
Now, that's all fine to say and we would all mostly agree - but what caught our eye was the graphics backing this up, where Campbell's Kaminsky shows the periods when multiple asset classes were in crisis by analyzing the ten worst quarterly returns for 21 different asset classes (four equity, four fixed income, five commodity, and eight currency).
You can clearly see that equities and commodities are able to shrug off a few crises around the world, but more than three crises at a time are a real problem (bonds, meanwhile, look like they just go up no matter what's happening - but don't bet on that continuing), while momentum strategies like trend following and managed futures need at least something happening, seeing their best performance with multiple crisis underway and worst when there are none.
Here's our look overlaying managed futures performance on top of the number of crises data:
Managed Futures = SocGen CTA Index