Systematic Funds to Buy Stocks No Matter Which Way Market Swings

The stock market’s volatility in recent years—marked by abrupt corrections, geopolitical shocks, and shifting interest rates—has left investors scrambling to find strategies that thrive in any environment. Enter systematic funds, which use algorithmic models, diversification, and risk management to generate returns regardless of whether markets rise or fall. These strategies, often overlooked in favor of traditional equity investing, have quietly outperformed benchmarks during both bull and bear markets. Here’s how they work and which ones to consider.

The Power of Systematic Strategies

Systematic funds rely on quantitative models to identify opportunities and mitigate risks. Unlike active managers who may succumb to emotional biases, these strategies operate with discipline, executing trades based on predefined rules. Their success stems from four core principles:
1. Diversification across asset classes, sectors, and geographies.
2. Dynamic rebalancing to capitalize on trends.
3. Risk parity, ensuring no single factor dominates outcomes.
4. Low correlation to traditional equity benchmarks.

Let’s explore the top strategies and their standout funds.

1. Systematic Macro Funds: Riding Global Trends

These funds analyze macroeconomic data—interest rates, inflation, geopolitical events—to bet on assets like equities, currencies, or commodities. During the 2022–2023 energy crisis, for example, they profited by shorting overvalued stocks while going long on oil and gold.

Star Performer: Federated Hermes MDT Large Cap Growth (QILGX)
- Strategy: Uses quantitative models to avoid overconcentration in any sector or stock.
- Performance: 10-year annualized return of 16.13%, outperforming the S&P 500.
- Holdings: Qualcomm (QCOM), Costco (COST), and Arista Networks (ANET).
- Risk Management: Top 10 holdings account for just ~50% of assets, minimizing downside.

2. Long-Short Equity Strategies: Profit in All Directions

These funds take long positions in undervalued stocks and short positions in overvalued ones, hedging against market downturns. During the 2023 tech correction, they shorted overhyped growth stocks while holding defensive plays like healthcare.

Star Performer: Putnam Global Technology Fund (PGTYX)
- Strategy: Analyzes KPIs to identify tech firms with improving fundamentals.
- Performance: 10-year annualized return of 20.44%, driven by secular trends like AI and cloud computing.
- Holdings: Microsoft (MSFT), NVIDIA (NVDA), and SEA (SE).

3. Managed Futures: Trend-Following Precision

Using momentum-based models, these funds buy assets in uptrends and sell those in downtrends. During the 2022 rate-hike selloff, they shorted equities and pivoted to bullish trades in 2023’s AI rebound.

Key Insight: Managed futures have historically delivered 5–7% annualized returns with low correlation to stocks.

4. Risk Parity Funds: Balancing Volatility

These funds allocate capital to assets (e.g., Treasuries, gold, global equities) based on their risk contributions, not market capitalization. In late 2022, their Treasury and gold holdings cushioned losses, while equities drove gains in 2023.

Example: Permanent Portfolio Aggressive Growth (PAGRX)
- Performance: 10-year return of 13.28%, with less volatility than the S&P 500.

5. ESG-Integrated Quantitative Funds: Values and Returns

By combining ESG criteria with factor models (e.g., value, momentum), these funds avoid companies with environmental or governance risks while targeting green energy and socially responsible tech.

The Bottom Line: Diversify Strategically

Systematic funds aren’t a panacea, but they offer unmatched resilience in turbulent markets. Over the past decade:
- Federated Hermes MDT (QILGX) beat the S&P 500 by 1.3% annually.
- Putnam Global Tech (PGTYX) outperformed tech-heavy benchmarks like the Nasdaq 100.
- Risk parity funds maintained consistent returns even as traditional equities saw 30%+ drawdowns in 2022.

In 2025, with inflation and geopolitical risks lingering, investors should allocate 10–20% of their portfolios to these strategies. As the old adage goes, “Don’t fight the model”—let algorithms do the heavy lifting.

Final Takeaway: Systematic funds are not just for institutional investors. For retail investors seeking steady returns through any market cycle, they’re a must-consider addition to a diversified portfolio.