Whitepaper

Modelling forward looking returns and combining traditional and alternative benchmarks

Back-tests are frequently used to gauge the quality of an investment strategy or the usefulness of a particular instrument to a portfolio. These simulated results are however susceptible to many sources of bias. In this short note we discuss how best to estimate the future performance of a selection of traditional benchmarks together with one alternative benchmark, that of long term trend following, in order to guide us in allocating to non-traditional investments within a typical portfolio.