Market Vision and Investment Styles

Abstract

The development of a simple taxonomy for trading style based on a worldview can serve as an important differentiation across money managers and provide insight into how many managers expect to generate returns. For instance, a taxonomy for active management can divide trading behavior into two broad types: convergent and divergent. The convergent–divergent dichotomy effectively encompasses the behavior of a broad universe of money managers and can be applied across a wide variety of asset types. This trading dichotomy can describe the philosophical differences between hedge funds and managed futures funds as well as similarities across asset types.