Our partners at Arrow Funds have recently published some relative strength research that should be essential reading for any advisor who is looking to provide value to their clients. Relative Strength Turns provides important insights into the cyclical nature of relative strength performance and makes a compelling case why now may be a great time to be allocating to relative strength strategies.
Historically, over very long periods of time, each of these relative strength models outperforms a buy-and-hold equity model. However, like many investment approaches, relative strength will sometimes underperform the market, and at other times it may outperform. This comparative performance, also known as RS Alpha, can be cyclical resulting in long-term trends with significant tops followed by underperformance and bottoms folloed by outperformance, as the chart below illustrates.
When the trend turns upward, it starts long periods of time when relative strength performance above the historical average.
The normal course of business in this industry is for fund companies to pound the table on a strategy or return factor that has already had an extended run of outperformance. Arrow Funds has taken a different approach with this research. Using historical data, they make a solid case for why relative strength is a winning long-term return factor and why the opportunity to enter relative strength strategies now may be particularly profitable.
Click below to read the entire piece.
Past performance is no guarantee of future returns. Click here for disclosures.
[...] Has relative strength performance finally turned? (Arrow Funds via Systematic Relative Strength) [...]
[...] Has relative strength performance finally turned? (Arrow Funds via Systematic Relative Strength) [...]