Diversified GEM Dual Momentum
Diversified GEM Dual Momentum is a tactical momentum strategy developed by Corey Hoffstein at Newfound Research as a direct response to a fragility problem embedded in Gary Antonacci's classic GEM Dual Momentum. Rather than running a single GEM model with one fixed lookback period, this version runs seven parallel versions simultaneously, each using a different lookback window ranging from 6 to 12 months, then holds equal weight across all seven.
Average Allocation
Based on historical average weights across all rebalance periods.
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -17.5% | +14.1% | +98.0% |
| 3 Year | -0.3% | +13.4% | +55.0% |
| 5 Year | +1.1% | +13.4% | +43.3% |
| 10 Year | +4.0% | +13.8% | +26.9% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.
Investment Philosophy
The core insight is that GEM's simplicity is also its vulnerability. Newfound's research showed that two adjacent lookback periods -- say, 9 months vs. 10 months -- can produce annual return differences of hundreds to thousands of basis points in any given year, not because one is better, but because of implementation luck. Critically, that luck does not mean-revert: a bad draw from one specification is just as likely to be followed by another bad draw. By running seven versions simultaneously, this portfolio neutralizes most of that specification risk, replacing a precise-but-fragile bet with a deliberately diversified one.
Who It's For
Investors who believe in the underlying logic of momentum and trend following but are uncomfortable placing their entire bet on a single model specification. It suits those with a long time horizon who can tolerate periods of underperformance relative to either a buy-and-hold equity portfolio or a single GEM implementation.
Pros
- Directly addresses one of the core criticisms of GEM: its sensitivity to lookback period selection
- Diversifying across specifications tends to smooth year-to-year return variance without abandoning the momentum/trend thesis
- Retains the capital-preservation objective of GEM by moving defensive when most or all lookback periods agree on a negative trend
Cons
- Holding seven partially-correlated versions of the same strategy means the portfolio will always include underperforming specifications; the cost of diversification is guaranteed partial wrongness
- Like all trend-following strategies, it is exposed to whipsaw risk in choppy, directionless markets -- diversification across lookbacks does not eliminate this
- More complex to implement manually than standard GEM, requiring seven separate signal calculations each month
Technical Notes
The portfolio splits capital into seven equal slices. Each month, each slice independently evaluates its assigned lookback period (6 through 12 months) and follows standard GEM logic: rotate to US equities, international equities, or bonds based on relative and absolute momentum signals. The result is that the portfolio can hold a blend of all three asset classes simultaneously, unlike single-specification GEM which is always 100% in one asset.
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