The following extract is a Top Traders Unplugged summary of a conversation between the podcast hosts Niels and Alan with Katy Kaminski from AlphaSimplex Group.
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Katy Kaminski is one of the most important research voices in systematic trend following. As Chief Research Strategist and co-portfolio manager at AlphaSimplex Group, she has spent over a decade developing the empirical and conceptual framework for understanding when and why trend following works. She coined the term “crisis alpha” in 2009, which has since become one of the most widely used concepts in the managed futures industry.
The core insight behind crisis alpha is that trend following is not a first responder in market stress. In short, sharp selloffs, trend strategies often falter alongside everything else, as correlations converge and signals become ambiguous. But in extended crises, those that develop over months rather than days, trend strategies adapt, find new directions, and begin to deliver the diversifying returns that investors expect of them. Kaminski describes this as second responder behaviour: slow to engage at first, but powerful once the new regime establishes itself.
In this conversation with Niels and Alan, she unpacks the practical implications of this insight for both managers and allocators. Managing expectations around the timing of crisis alpha is one of the hardest communication challenges in the industry, and Kaminski addresses it directly. She also covers machine learning as a research tool, the role of commodities in genuine crisis environments, and why she believes the Sharpe ratio is the wrong objective function for a pure trend mandate.
AlphaSimplex was founded by Andrew Lo, whose Adaptive Markets Hypothesis is a core part of the firm’s intellectual framework.
Related reading: Read: The Regime Shift: Recognising Transition in Real Time