Hi Nicolas, thank you for your very valuable article. Active long volatility may be perfectly complementing trend-following managed futures for mitigating equity portfolio risks during most diverse black swan scenarios without opportunity costs. This is because it seems to react much surer, faster and stronger to events like COVID-19 within days due to its stronger long volatility bias than active trend. Active long volatility also tends to keep its crisis alpha gains better or to even add up to them during rebound phases as long as volatility remains elevated.

However, during usually extended times of well performing equities with low volatility this defensive asset struggles to just break even against its cost of carry. But how persistent is this ability of some but not all long volatility funds with quite diverse options and futures strategies, which showed this ability quite homogeneously over the past rather calm 8 years? And (how) can they be systematically selected ex ante?

Complementary to long vol., active trend can gain much more during pronounced equity bull markets and during slow and less volatile crises like dot.com. This provides for its equity-like level of non-correlated return long-term proven for many decades. However active trend lags more or less for weeks into a short crisis like in March to build up anti-correlation and crisis alpha returns and looses quite substantially of them during rebounds.

Altogether, if active long volatility succeeds to persistently provide long-term profitability over complete market cycles like active trend besides excellent crisis alpha it may become the second really beneficial alternative asset for long-term buy&hold investors as an effective and cost-efficient protection against expected more turbulent times. Chris Cole from Artemis strongly recommends it already for the really long-term of a century in his Dragon Portfolio besides the only useful other alternative strategy of active trend.

Indeed, more effective, robust and profitable diversification is hardly imaginable. Good to know from these two gentlemen in which two small corners to look for real value in the vast HF space!