Sudden market downturns, such as the one we experienced yesterday morning, adversely affect algorithmic funds which are based on trend following strategies. Typically, these strategies close their positions after experiencing big loss (stop-loss activates), therefore they give a negative return even if later market quickly returns to previous level.
In case of unexpected and shocking event happening in the world, stock market is not the only one to react. Bonds, forex, metals (e.g. gold) are also widely affected and experience sharp drops or rises. Usually investment funds try to protect themselves from such events by diversifying investments to multiple asset classes, however this does not always work as all main asset classes are affected by these events.
Algorithmic funds, which diversify investments not only by asset classes, but also by using a wide number of independent strategies, successfully operate and generate profit even on unexpected events. Thus, both “Brexit” referendum and the US president election, can be profitable for algorithmic investment funds.
“Algorithmic Trading Portfolio” has earned 0.48% profit during “Brexit” referendum month of June. The result is also positive so far this month after the announcement of the US presidential election results.
“Algorithmic Trading Portfolio” is the only investment fund in the Baltic countries that uses 100% automated technical strategies.