Momentum Funds
Taking advantage of momentum
Landry Morin Momentum Funds enhance the returns on our clients' portfolios.
The persistence of price return – or momentum – is the most powerful and best-documented market anomaly. Momentum refers to the trend whereby securities whose price has increased the most over the past 12 months continue to outperform over the following three to 12 months. The opposite also holds true: securities whose price has declined the most tend to continue to underperform. A systematic quantitative strategy based on momentum can generate long-term returns that significantly outperform the market.
Momentum strategies are characterized by strong sector concentration and are therefore an excellent complement to a portfolio that is already diversified with exchange-traded funds. Momentum is also an effective complement to "value" strategies because these two factors are negatively correlated.
Proven methodology
For almost 15 years, by drawing on the considerable academic research on this subject as well as performing their own research, Jean-Luc Landry and Landry Morin have been developing and using a quantitative methodology that systematically exploits the momentum factor.
Jean-Luc Landry launched Canada's first momentum fund in 1996. Since inception, it has been the best performing Canadian equity fund.
Advantages of Momentum Funds
- Momentum Funds generate excess returns, in other words returns that outperform stock market indexes.
- They are an excellent complement to a diversified portfolio based on exchange-traded funds.
- The momentum and value factors are negatively correlated. Adding a momentum fund to a value portfolio therefore enhances its risk/return profile.
- Momentum Funds reduce portfolio risk when used in a market-neutral strategy, as is the case of our Long/Short Momentum Fund.