“Momentum is the center stage anomaly of recent years…an anomaly that is above suspicion…the premier market anomaly.

– Eugene Fama, Nobel Laureate in Economics 2013 –

The strategy’s combination of attributes may help investors address one of the critical problems in portfolio construction: the lack of true portfolio diversifiers that can also provide attractive long-run returns.

The Divergence Program has continuously traded for private accounts since 2005 and is the product of more than 15 years of ongoing research.

To Fulfill Our Portfolio Role, We
Target 3 Key Results

  1. Long-term capital appreciation
  2. Low correlation with stocks and bonds
  3. Bear market overwatch



Divergence — the powerful, trend-reinforcing momentum property of markets and other social phenomena – is a recurring feature of human economic history. Evidence of divergence can be found in the wheat ledgers of ancient Sumeria, the cargo logs of the cosmopolitan Phoenician seafarers, and the accounting books of the paramilitary-capitalist Dutch East India Company.

Extreme and extended moves in asset prices have punctuated many of the most pivotal events in world civilization, including wars, natural disasters, speculative bubbles, crashes, and geopolitical crises.  The Bastiat Divergence Program endeavors to systematically harvest these price trends, and targets long-term equities-level returns over a business cycle.

Low Correlation with Stocks and Bonds

An elusive goal in finance is to find investment opportunities with returns that are not correlated with the stock market.  The Divergence Program’s performance has historically had a low to negative correlation with the S&P 500 Index.

In our assessment, this independence is the product of 2 capabilities:

1. The ability to be directionally agnostic. The Program can execute both long and short positions.

2. Balanced portfolio coverage that spans dozens of markets across 9 geo-strategic sectors: energy, metals, grains, meats, soft commodities, equity indexes, interest rates, currencies, and volatility.


Bastiat’s clients seek access to simple, easily-implemented strategies to diversify their portfolios and lower exposure to business cycle downturns and equity market risk.  The majority of risk assets — stock markets, private equity and real estate investments, hedge funds, even fine art — typically suffer declines together during protracted periods of equity market distress.

Economic downturns and adverse market scenarios can force sequential pricing readjustment – divergence – in financial and commodity futures markets.  As a result, the worst conditions for traditional assets (a debt deflation, for example) may be favorable for the Divergence Program.

The military term for a tactical element that is assigned the protective role is “Overwatch”.  The Divergence Program is typically deployed to fill the Overwatch position in a portfolio setting and may offer investors a well-tested and liquid option to upgrade their defense against bear markets without handicapping their overall returns. The Bastiat team has been on Overwatch for more than thirteen years.

“The improvements from holding… managed futures are so large… [they] clearly dominate… [other] portfolios… by very considerable margins. The combined portfolios.. show substantially less risk at every possible level of expected return…

– John Lintner, Co-Founder Capital Asset Pricing Model, 1983 –