Skip to main content
QMA LogoQMA Logo
  • Overview
    • Our Philosophy
    • Our History
    • The Team
    • Inclusion & Diversity
    • Contact Us
  • Overview
    • Diversification
    • ESG
    • Factor Foundations
    • Market Views
    • Solutions and Customization
    • Value
  • Overview
    • ESG Insights
    • ESG Policy
    • Stewardship and Governance
  • Overview
    • Quantitative Equity
    • Global Multi-Asset Solutions
    • QMA Wadhwani

    Featured Solutions

    Featured Solutions

  • Client Log In
  • Careers
Road Lanes
Quarterly Letter

Quarterly Letter: Positioning in Your Lane: Learning from Past Asset CyclesQuarterlyLetter:PositioninginYourLane:LearningfromPastAssetCycles

By Andrew Dyson — Oct 15, 2019

10 mins read

Share
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL
Read More

Share

Asset cycles are an enduring feature of financial markets. If you are going to invest in cyclical assets, it’s important to make the journey through the cycle worthwhile. It will always be advantageous to lean into a cycle, i.e., to deepen positioning as the cycle moves against you. In an ideal world, you would reach your maximum position at the trough of the cycle.  The crucial corollary is that you never want to take your maximum position too early.  Of course, it’s never easy to time positioning so precisely, but this insight does favor processes that build in a deepening mechanism (such as we do with our adaptive allocation to value factors in equity portfolios, for example).

It may not always be apparent, however, which assets are cyclical, and which are secular.  When in doubt, we argue for assuming they’re cyclical—and adopting a countercyclical decision mechanism. So many forces inherently create asset cycles: underlying economic cycles, factor cycles, the general principle of reversion to the mean, e.g., through corporate competition.  On top of that, you have human behavior, which is inherently pro-cyclical. If you want to build a disciplined countercyclical decision mechanism, investors and fiduciaries may want to consider tracking the flows of funds (and dry powder particularly), then skewing allocations in the opposite direction.

Read More
  • By Andrew DysonChairman and Chief Executive Officer, QMA
  • About Us

    • Overview

    • Our Philosophy

    • Our History

    • The Team

    • Inclusion & Diversity

    • Contact Us

  • Insights

    • Overview

    • Diversification

    • ESG

    • Factor Foundations

    • Market Views

    • Solutions and Customization

    • Value

  • ESG

    • Overview

    • Insights

    • ESG Policy

    • Stewardship and Governance

  • Strategies

    • Overview

    • Quantitative Equity

    • Global Multi-Asset Solutions

    • QMA Wadhwani

    • Careers

QMA Logo
  • Terms & Conditions
  • Privacy Center
  • Accessibility Help

Prudential Financial, Inc. and its related entities.

For Professional Investors only. All investments involve risk, including the possible loss of capital.

It is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM, Inc., is the principal asset management business of PFI and is a registered investment advisor with the US Securities and Exchange Commission(SEC). Registration with the SEC does not imply a certain level of skill or training.  PGIM is a trading name of PGIM, Inc and its global subsidiaries. 

In the United Kingdom, information is issued by PGIM Limited with registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 193418). In the European Economic Area (“EEA”), information is issued by PGIM Netherlands B.V. with registered office: Gustav Mahlerlaan 1212, 1081 LA  Amsterdam, The Netherlands. PGIM Netherlands B.V. is, authorised by the Autoriteit Financiële Markten (“AFM”) in the Netherlands (Registration number 15003620) and operating on the basis of a European passport. In certain EEA countries, information is, where permitted, presented by PGIM Limited in reliance of provisions, exemptions or licenses available to PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. These materials are issued by PGIM Limited and/or PGIM Netherlands B.V. to persons who are professional clients as defined  under the rules of the FCA and/or to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II).

In Japan, investment management services are made available by PGIM Japan, Co. Ltd., ("PGIM Japan"), a registered Financial Instruments Business Operator with the Financial Services Agency of Japan. In Hong Kong, information is provided by PGIM (Hong Kong) Limited, a regulated entity with the Securities & Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 (paragraph (a) to (i) of the Securities and Futures Ordinance (Cap.571). In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (“PGIM Singapore”), a Singapore investment manager that is licensed as a capital markets service license holder by the Monetary Authority of Singapore and an exempt financial adviser. These materials are issued by PGIM Singapore for the general information of “institutional investors” pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) and “accredited investors” and other relevant persons in accordance with the conditions specified in Sections 305 of the SFA. In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors on a cross-border basis.

Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. PGIM, the PGIM logo and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.
The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.

©2021 PFI and its related entities. © 2021 QMA. All Rights Reserved.

QMA’s predecessor began managing U.S. equity accounts for institutional clients in January 1975.