Resolve Riffs Investment Podcast · ReSolve Asset Management

Elevate Your Return Stacks with the Combined Power of Trend & Carry

·1 hr 14 min·4 clips

Carry did a pretty good job during 2000, 2008, and the Ukraine war.

1. Resolve Riffs Investment Podcast focuses this episode on trend following and carry as two systematic macro strategies used in managed futures. 2. Corey Hofstein, co-founder and chief investment officer of Newfound Research, and Rodrigo Gordillo, president at Resolve Asset Management Global, lead the discussion and present the portfolio case for return stacking. 3. The episode asks what trend and carry are, how they differ, and why combining them might improve portfolio construction. 4. Rodrigo decomposes return into capital appreciation and yield, then maps trend to price movement and carry to the return embedded in a futures curve. 5. He explains futures term structure using contango and backwardation, with storage costs, insurance, financing costs, supply shortages, and convenience yield as drivers of different prices across expiries. 6. Trend is described as a front-month strategy that looks back 20, 30, 40, 120, or 240 days and goes long rising prices or short falling prices. 7. Carry is described as a term-structure strategy that cares about the whole curve and wants the shape to persist long enough to earn the yield embedded in the contract. 8. Rodrigo uses a dividend-paying equity example to show that futures carry is not missing from the contract but embedded in the pricing curve. 9. He argues that trend and carry can offset each other’s blind spots, such as trend being long gold while negative carry erodes returns. 10. He then links trend to risk transfer, behavioral lag, order execution delays, and queuing dynamics as reasons the effect may persist. 11. Carry is tied to risk premia across equities, bonds, commodities, and currencies, with examples including dividend yield, coupon yield plus roll-down, convenience yield, and rate differentials. 12. Rodrigo says carry is likely to survive because market participants keep paying for risk transfer rather than because of investor misbehavior. 13. The episode notes that the CTA and managed-futures space uses trend and carry most often, with trend easier to explain and carry less intuitive to many allocators. 14. For the comparison, the team uses the stock trend index as the trend proxy and a Resolve paper, Managed Futures Carry: A Practitioner's Guide, as the carry framework. 15. The carry framework is described as cross-sectional and time-series aware, not forced into market neutrality, and measured relative to its own historical norms. 16. Rodrigo shows that carry has low average correlation to trend, U.S. equities, and U.S. bonds, but the more important feature is how those correlations change through time. 17. The calendar-year chart from 2000 to 2023 shows that trend, carry, and their combination each produce different annual paths, with one strategy often helping when the other struggles. 18. He notes a return kink around 2013 and links it to broader awareness of carry after an AQR paper by Koijen, implying future carry returns may look more like the post-2013 period. 19. The episode feels like a technical webinar, with slide-by-slide explanation, audience questions, and a back-and-forth between Rodrigo and Corey on volatility targeting and manager behavior. 20. Portfolio builders interested in managed futures and macro diversification would likely value this; listeners wanting a light, non-technical finance discussion probably would not.

As heard by us

A focused, practical comparison of carry and trend within portfolio construction.

The episode treats return stacking with a steady, practical hand, setting carry and trend side by side without drifting into jargon for its own sake. It keeps the focus on portfolio construction and makes the apples-to-apples comparison feel like the point, not a side note.

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Why you'd press play

You want a sharper way to think about trend, carry, and how they stack.

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