The Trendline Selection AMC is an actively managed certificate that invests solely in stocks and derivatives exhibiting positive momentum. The entry and exit signals for the securities that this certificate invests in are based on quantitative algorithms. We do not apply any fundamental overlay. The efficiency of the signals we use is empirically tested and constantly monitored.
This trend-following momentum strategy is mainly based on signals related to prices, enabling us to capitalise on new trends early on as the price is often a first mover and up to date. Using the Trendline Selection, investors in the certificate can exploit behavioural effects such as herding. We aim to invest in new trends as early as possible to profit from as much of the market move as possible.
Price-related signals have two main advantages. First, they can be tested and optimised using historical datasets without too many biases. This enables us to empirically test our signals for significance before and while in use. Second, we can track signals across an investment universe of thousands of stocks within seconds thanks to algorithms that are screening the markets on an ongoing basis. This means a lot of investment opportunities arise every day.
Our algorithm only considers price-related signals; we do not use any fundamental factors like a firm’s net income or book value as inputs. Fundamentals are often considered by stock investors, but involve the drawback of being lagging indicators as published results always cover the past, whereas the stock price is an up-to-date indicator. Because the strategy is purely based on prices, an allocation could be a good way of diversifying a broad portfolio that includes strategies managed according to a fundamental approach.