Riding Out the Storm: Why Trend Following Still Deserves Your Patience

2025 hasn’t been kind to trend followers. Returns are sagging, drawdowns are biting, and the question on everyone’s mind is the same: “Has something fundamentally changed? Is this time different?”

Russell Korgaonkar, Chief Investment Officer at Man AHL, has heard it all before. And he’s not buying it. In a thorough and level-headed new analysis¹, Korgaonkar doesn’t sugarcoat the current struggles—but he does remind us of the bigger picture. Through data, historical patterns, and clear logic, he shows why abandoning trend following now could be the real mistake.

“We remain convinced that the best approach is to stick to our process: trend following has produced return streams that have historically benefited investors who can stay the course.”

Why Everyone’s Worried

Trend following is having a rough year. The SG Trend Index is down 18.6% on a rolling 12-month basis—one of the sharpest declines on record. Understandably, some investors are starting to get spooked.

But Korgaonkar offers some quick perspective: this kind of drawdown isn’t as outlandish as it feels.

“Only twice has the Société Générale Trend index lost more than 15% over rolling 12-month windows... What is notable about this distribution is how infrequent losses of greater than 15% are, while gains of more than 30% have been somewhat common.”

Six Reasons Not to Panic

Korgaonkar’s argument is clear: trend following isn’t broken—it’s being tested. And based on six lines of inquiry, history suggests we’re right where we should be.

1. Yes, Big Drawdowns Happen—And They Often Set Up Big Gains

The last time we saw a 12-month drawdown this bad was in early 2019. What happened next? A +82.5% run. In fact, looking across all historical drawdowns over 10%, the average gain over the following year was nearly +10%.

“We see an average return of +9.8% following all drawdowns greater than 10% over a 12-month rolling period.”

2. It’s Not Too Crowded

You’d expect a crowded strategy to buckle under its own weight. But trend-following assets under management (AUM) haven’t exploded. Their share of total futures volumes? Still modest. And the link between flows and performance? Practically non-existent.

“There is no evidence to suggest trend AUM is getting too big or becoming too large of a share of futures markets to raise cause for concern.”

3. The Macro Backdrop is Messy—But It Won’t Stay That Way Forever

Yes, 2025’s policy reversals and whipsaws have crushed consistency. But this isn’t the first rough patch for trend.

“Trend following has also historically wobbled before delivering some of its most notable returns.”

Cocoa is a great example: dead weight for years, then a hero in 2024. The point? Trends don’t vanish—they evolve. And patience often pays.

4. Drawdowns Are Built In—They’re Not a Sign Something’s Wrong

With a Sharpe ratio of 0.5 and 10% volatility, there’s a nearly 80% chance of seeing a 20% drawdown over 25 years. That’s normal.

“Drawdowns don’t just test the numbers — they test the nerves.”

Simulated portfolios that bailed at -20% and waited for a rebound underperformed those that stayed invested—by 2.2% annually.

5. Cut and Run? You’ll Miss the Rebound

Bailing during drawdowns often means missing the comeback. Remember the factor investing slump in 2020? Many gave up. Those who stuck around saw an +84% recovery.

“Luck plays a role in short-term results, but over the long term, persistent market inefficiencies can play out.”

6. Convexity: It’s Not Just Diversification—It’s Timing That Matters

Trend following shines when you need it most—during equity market meltdowns. Unlike bonds or multi-strategy hedge funds, trend tends to deliver when equities are tanking.

“Trend following’s best performance has historically come in the worst periods for equity markets. In short, it’s diversification when you need it most.”

Take April 2025. Trend systems were correctly positioned during a major market selloff—until a surprise 90-day tariff pause turned the market on a dime. Without that pause, trend could’ve outperformed in a crisis.

The Bottom Line: Stick With It

Korgaonkar doesn’t deny that this is a tough stretch. But tough stretches are part of the game. If anything, they’re necessary. You can’t capture trend’s long-term edge without enduring some pain along the way.

“It’s always different, the world is constantly changing, but as far as trend following is concerned – no, we don’t believe it’s different this time.”

“We also ultimately respect the nature of the markets, and admit that most of the time we just don’t know what’s going to happen.”

So if your committee’s getting antsy—or you are—it might help to zoom out. This isn’t the death of trend. It’s just another one of those times where patience is hard… and necessary.

Key Takeaways for Advisors & Investors

• Drawdowns come with the territory. They’re part of trend’s DNA.
• Jumping ship during a dip can be costly. Staying invested has historically paid off.
• Trend’s edge is in its timing. It delivers diversification when you need it most.
• There’s no sign of crowding. Trend is still a small player in futures markets.
• Conviction matters. Data favors those who stay the course.

This time might feel different—but that’s the nature of markets. The real question is: are you willing to stick it out when it matters most?

And as Korgaonkar reminds us: that’s where the opportunity begins.

Footnotes:

1 "Trend Following and Drawdowns: Is This Time Different? | Man Group." 8 July 2025.