What is Trend Following?

Trend following is an investment strategy based on the technical analysis of changing market prices, rather than on the fundamental strengths of the investments. This strategy believes that prices tend to move upwards or downwards over time. Therefore, trend followers try to take advantage of these “market trends” by observing current trends and deciding whether to buy or sell based on these factors.

Potential Benefits for Trend-Following Strategies
Owning trend-following strategies within your overall portfolio may bring many benefits, such as the potential
to provide:
1    Reduced risk
2    Portfolio diversification
3    Enhanced returns
4    Exposure to a broad range of markets

Potential for Reduced Risk:
Adding a trend-following strategy to a portfolio has the potential to provide a better risk-adjusted return. Allocating 20% of a portfolio to a trend-following strategy helps provide lower volatility, lower market risk, and significantly lower maximum drawdown, all while producing similar returns to that of a traditional stock/bond portfolio.


Past Performance is not a guarantee of future results. Index performance is not illustrative of fund performance. Bonds are represented by Bloomberg Barclays U.S. Aggregate Index, Stocks are represented by S&P 500 Index, and Trend Following is represented by SG Trend Index. The referenced indices are shown for general market comparisons and are not meant to represent a specific Fund. One cannot invest directly in an index. Source: Morningstar and LoCorr Fund Management. 
 
Seeks Portfolio Diversification
Trend-following strategies have historically shown low or virtually zero correlation to a variety of traditional and alternative investments, providing the ability to further diversify an investment portfolio.


 

Bonds are represented by Bloomberg Barclays U.S. Aggregate Index, U.S. Stocks are represented by S&P 500 Index, Foreign Stocks are represented by MSCI EAFE Index, and Trend-Following Strategies are represented by SG Trend Index. The referenced indices are shown for general market comparisons and are not meant to represent the Fund. Performance for the referenced indices through 6/30/2021 is as follows: Bloomberg Barclays U.S. Agg Bond Index –  -1.60% YTD, -0.33% 1-year, 3.03% 5-years, 3.39% 10-years; S&P 500 Index –  15.25% YTD, 40.79% 1-year, 17.65% 5-years, 14.84% 10-years; MSCI EAFE Index –  9.17% YTD, 32.92% 1-year, 10.79% 5-years, 6.38% 10-years; SG Trend Index –  7.48% YTD, 15.21% 1-year, 1.54% 5-years, 2.60% 10-years.
Sources: Morningstar and LoCorr Fund Management.


Potential for Enhanced Returns
Trend-following strategies can potentially enhance a portfolio’s overall performance by producing positive returns in bull and bear markets. As the chart illustrates, these strategies have yielded positive long-term performance, even during market downturns.
 
Performance of Trend-Following Strategies and U.S. Stocks
Growth of a Hypothetical $1,000 investment – September 1, 2000 through June 30, 2021


 
Past Performance is not a guarantee of future results. U.S. Stocks represented by S&P 500 Index. Trend-Following Strategies represented by SG Trend Index. The referenced indices are shown for general market comparisons and are not meant to represent a specific fund. The growth of $1,000 chart reflects a hypothetical $1,000 investment in the index noted. Index performance is not illustrative of fund performance. One cannot invest directly in an index. Fund performance may be obtained by calling 1.855.LCFUNDS (1.855.523.8637). Source: LoCorr Fund Management. 


Exposure to a Broad Range of Markets
Trend-following strategies have the ability to provide exposure to a broad range of global markets. This may include, but is not necessarily limited to, sectors such as currencies, stock indices, commodities and fixed income.  As you can see below, there are multiple markets within each sector, providing the ability for more diversification as compared to traditional stock and bond portfolios.
 

The above list is a partial representation of possible market exposure.

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Diversification does not assure a profit nor protect against loss in a declining market.