BO110: Change vs Inconsistency

In this episode, we get an exciting behind-the-scenes story of one of the most famous systematic trading firms of its time, AHL. Our guest is one of the firms founders and takes us from the company’s birth to its acquisition by Man Group. We also discuss how he started his next company, Aspect Capital, how he creates his trading models, and how to build and run a successful multi-billion trend-following firm. This episode is full of insights and stories that you won’t hear elsewhere.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:About Quantitative Investment research.About Martin’s background in physics.Martin’s time at his first company, AHL and how it had a profound effect on the whole managed futures industry.How Martin met his future AHL co-founders at university.Why AHL was a happy accident.How he met his friend Michael Adam and went to work for his dad after studying in Oxford.Martin started working for Michael’s dad as well, investigate many trading models and distilling them into key concepts.In 1987 they founded AHL with David Harding after leaving Michael’s father’s business.They started with $100k of investor money that bridged their split from the family business.About MINT, a pioneering systematic CTA in the early 80s.How they tried to articulate their trading patterns in the form of a computer trading model.What the initial AHL model looked like back then.How they over optimized in the beginning and had to learn things as they went along.How AHL got involved with Man Group.The skills that each of the 3 Founders brought to the table.In 1989 Man Group took a stake in AHL.How the Man buy changed their business.What happened after Man’s IPO.How Michael, David, and Martin went their own ways after they left AHL.How Martin started Aspect Capital with Anthony Todd, Eugine Lambert and Michael Adam.Why he parted ways with his other AHL founders initially and did not start AHL 2.0.What he does when he is not working.Aspect was founded on bringing managed futures to the institutional side of things.What it looks like running 100-person+ organization.What he looks for when adding new researchers and staff to his team.The lessons he has learned and the mistakes he’s made in building a culture of an organization.About their track record and how it should be viewed.Martin’s persistence in using trend following models.How his models have changed and how he has dealt with risk management over the years.What it means to change his models from a binary implementation to an analog implementation.-----Resources & Links Mentioned in this Episode:Learn more about AHL.Find out more about the MAN group.Follow Niels on Twitter, LinkedIn, YouTube or via the <a href="https://www.toptradersunplugged.com/" rel="noopener noreferrer"

6 Okt 20141h 9min

In Part 2 of our conversation with the CEO of Insch Capital Management, we talk about how the firm’s trading models work and how they were built. We discuss how Insch deals with drawdowns, increased regulation, and marketing. This is a truly in-depth episode into the mind of a hedge fund Founder and the inner workings of an Alternative investment firm.Welcome to the second part of our conversation with Chris Cruden.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:Indicators that are more robust than others.Chris’ views on stop losses.How his firm deals with risk and how he uses Index Risk.How correlations play a part in his models.About risk equivalency.how he deals with drawdowns.Why a sense of humor is important in this business, especially during drawdowns.How investors don’t share the same confidence in the model as managers and how managers can better share that confidence.How simple his system really is.Why you must have discipline. Many trend followers are making all-time highs but many people have announced the death of trend following time and time again.What the “black swan” event and the “gray swan” event would be for Chris’ business.The two kinds of research that his firm does.Why his team looks at emerging currencies in their research even though they do not trade them.What he is looking for in terms of red flags during his research that suggest models need to be tweaked.How he tries to stand out from the crowd in order to attract investors.Why he is based in Lugano, Switzerland.What Chris would ask David Harding if he was doing the interviewing instead of being interviewed.What investors forget to ask him.Why it’s a good idea to ask if you can try a dummy account with a new investment manager to see how it works.How he deals with the difficulties of regulation.-----Resources & Links Mentioned in this Episode:Market Wizards: Interviews with Top TradersTrend Following: How to Make Millions in Up or Down MarketsFollow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” <a href="https://www.toptradersunplugged.com/10-reasons-shownotes" rel="noopener noreferrer"...

2 Okt 20141h 5min

Our next guest was a British Army Officer and moved to South Africa before finding a career in the financial markets. He is now the CEO of his Managed Futures firm and has worked with some of the industry’s most influential companies and people, including Dean Witter and AHL. The story of his career’s beginnings and the lessons he used to become a systematic trend follower are unique and insightful. You’re sure to learn a lot from this episode.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How Chris came to work with Dean Witter, one of the leading players in the industry back in the 1980’s & 90’s.About his days working for AHL in the early 90’s.How his career started off as a British Army officer.His time in Africa after leaving the army – finding himself in Rhodesia (now Zimbabwe).About his first job at Syfrets Trust bank in South Africa as a Gold analyst.How he came to do business with Dean Witter Reynolds and after a few years why they hired him.After the 1988 crash he found himself back in London and joined AHL.In 1993 he went back to New York joined with Robert M Tamiso, a mentor to him.Why he looked for a market that was not overcrowded and easily spooked, which was the inter-bank foreign exchange market.What AHL was doing in the beginning of the company.Why he started trading currencies early on.How Bob Tamiso was successful and the way he carried himself that made him successful.Why Bob Tamiso’s best advice was to always “show up”.About Chris’ golf playing and his ties to Scotland.His routine at work and why being a systematic trader makes him boring and bad at marketing, but helps him sleep at night knowing they are going to “show up” the next day.About Chris’ goal with his work and why he is happy with the size of his firm and why growth is not the prime focus.How he has such low staff turnover and why he likes to work with young people who have never worked anywhere else in the financial world.What matters when discussing a firm’s track record and how his programs are setup.The building blocks of their trading program and how the money they’ve made has historically come mainly from interest rate differentials.What the environment has been like for a currency program in the last 5 years.Why he believes the current intervention by The Fed is not so substantially different that his model won’t be able to see good returns in the futureHow he designed his program and what its objective is.What currencies he trades and how he trades them.Why volatility has been so low but why he sees that it is coming back and why it’s a good thing for his models.-----Resources & Links Mentioned in this Episode:Learn about Dean Witter.Get more information on AHL.For historical background, see this article on Rhodesia.Learn more about Lugano, the city where Insch is located.Follow Niels on Twitter, <a...

29 Sep 20141h 10min

In the second part of our interview with hedge fund founder Luc Van Hof, we dive into the philosophy and creation behind his trading models. We also discuss why he is a risk averse person, what hobbies help him stay focused at work, and what investors and fund managers can do to grow their business and trade smarter.Welcome to Part 2 of our conversation with Luc Van Hof.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How to avoid model decay and how to avoid the risk when the model may stop working in the future.How to diversify your types of models – dynamic filtering that takes place. Automatic de-leveraging when a certain market goes down.How Luc chooses his models and why he does:Short term trend followingShort term mean reversionWhat concepts for his models repeat themselves over and over again, pattern recognition.About volatility risk premium strategies.How he tests his models that have so many moving parts in short timeframes.His views on position sizing.What investors should look at in terms of risk managementMaximum Exposure for a trade – determines the maximum risk that a trade can generate for the total of the portfolio.How Luc deals with drawdowns.Why he is a risk averse person.Why he is still researching other trading ideas when he thinks he’s found a way that mitigates risk effectively.How he gets his ideas from math puzzles, reading about geometry and logic.Why investors should look at the predictability of returns and how to convince investors what and how you are going to trade is something that is going to work.Why discipline is the main characteristic that people need to be a successful fund manager.The books that he recommends for managers starting out wanting to be successful.How his hobbies such as nature, reading, and music help to keep him balanced in a busy financial world.-----Resources & Links Mentioned in this Episode:Market WizardsThe PredictorsMean ReversionRisk PremiumFollow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” <a...

25 Sep 20141h 22min

Our next guest worked for the European Commission before starting his own firm. In an unusual career twist, he sold his company to a larger firm only to buy it back from them a few years later and had to start from scratch. Learn about his aversion to risk, his short term trading strategies, and his interesting past as one of the fastest readers in the world.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:About Luc’s time working for the treasuring of the European Commission starting in 1985.How he learned about Options trading before many people were doing.About his years working for Bankers Trust in London and Morgan Stanley as a trader and how those experiences influenced his career later.How he started Analytic Investment Management (AIM), doing options trading.How he acquired his first clients.Why he got started trading currencies.About the early days of trading and the physically demanding work before computers took over.How his attendance at conferences, getting invited to speak on panels, and other speaking engagement led to the sale of his company.About the selling of AIM to Trobico in 2006 and why trobico bought his firm.How he ended up buying his company back from Trobico in 2010 after management changes caused them to shut down everything in the alternative investment space.About the different products that Capital Hedge provides.How he had to start from scratch, getting all new investments after buying his firm back.Where he is now – advising $200 Million US dollars, mainly in his DPI program.How he is one of the fasted readers in the world, and how he learned to speed-read from a class he took in the Netherlands.How he convinces institutional investors that a 2-3 person company is enough to manage the investments they have, and how technology has changed the game from needing a staff of 25 to needing just 2.How small managers need to describe what they do, and why they might not want a multibillion-under-management hedge fund.How investors should look at a track record of a firm and why that doesn’t necessarily mean good returns in the future.Why investors should see the latest test of what the firm is currently running rather than worry too much about the historic model results.How Luc trades and develops his systems, and how he looks for patters in the market.How to avoid model decay and avoid the risk when the model will stop working in the future.-----Resources & Links Mentioned in this Episode:Learn about the European Commission.More about Bankers Trust.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written <a...

22 Sep 20141h 19min

In the second part of our conversation with Marc Malek, we explore the strategies that he uses to build his models and how he explains them in simple terms. We go in depth about drawdowns and what investors should know about them. We also discuss what keeps Marc inspired, what he does for fun, and how he couldn’t imagine having any other job.Welcome back to Part 2 of our conversation with Marc Malek.In This Episode, You’ll Learn:About the four strategies inside Conquest Capital’s Macro program.How the technological revolution has changed the market and trend following, now that everyone gets the same information at the same time.Marc’s approach to building trading models.Defining risk in terms of upside deviation vs. downside deviation in the portfolio.Why correlation is one of the most misunderstood stats that you can use.How Marc deals with drawdowns and why he thinks nothing new is happening now that did not happen before.His view on backtesting.The challenges hedge fund owners face in the current business climate and why Marc is lucky to have investors that have stuck by him.Why Marc is motivated to keep pushing through this period and why he loves what he does.The story of how Conquest Capital got its first investor, and how in the early days investors cared more about managers and interacting with them personally.Marc’s biggest failures, and how he overcame them.The hobbies Marc has and why he likes seemingly dangerous sports.Resources & Links Mentioned in this Episode:Learn more about Backtesting.Learn about Downside Deviation.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.Follow Marc Malek on Linkedin.IT’s TRUE 👀 – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “The Many Flavors of Trend Following” here.Learn more about the Trend Barometer here.Send your questions to info@toptradersunplugged.comAnd please share this episode with a like-minded friend and leave an honest rating & review on iTunes so more people can discover the podcast.

18 Sep 20141h 5min

This guest had a different path that eventually led to owning a hedgefund in New York. Marc Malek got a grant from NASA to study how different armored tank positions would lead to winning results on the battlefield. Traveling to Wisconsin to begin his research, his advisor steered him to do a similar project on stocks, bonds, and equities instead. He went on to work for UBS and finally founded his own firm, Conquest Capital Group. His story will fascinate and inspire you.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:The story of how Marc became interested in the financial markets after a university project, a bit unexpectedly.About Marc’s upbringing in Beirut, Lebanon.How his studies at Caltech in neural networks and decision support systems eventually led him to the stock market.About his grant from NASA to research the position of tanks.His job offer from Oracle that he turned down.About his first job out of university at Salomon Brothers and why he left after one year.How Marc got hired at UBS and moved to Europe and then Asia during his time with the company.Marc’s departure from UBS and how he started Conquest Capital Group.How trader’s thought processes are turned into trading models.Why models are not black boxes and why investors should not be worried.The history of trend following and the old systematic approach.How markets move for alpha and beta reasons.About “turtle strategies” vs “trend following 2.0”.How Marc’s strategies and models have evolved over time.About his product Conquest Macro and the two mandates that the product has.How his product makes the bulk of its return during periods of risk aversion and high volatility.How his firm developed a risk index in a time before anyone was doing them.-----Resources & Links Mentioned in this Episode:See Episodes 13 and 14 for more discussion on “Turtle Strategies”.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer here.Send your questions to <a href="mailto:info@toptradersunplugged.com%22%20%5Ct%20%22_blank" rel="noopener noreferrer"...

15 Sep 20141h 13min

Welcome back to the second part of our discussion with Aref Karim. In this episode, Aref discusses his firm’s strategies and the broader philosophies that drives what he does. He also talks about market volatility, the need to innovate while keeping models intact, his perspective on drawdowns, and what investors should be asking their managers. You’ll learn something about the art galleries and music that fuels his inspiration, and what he thinks it takes to become a successful hedge fund manager.You will be amazed by the candid truthfulness of Aref at the end of the episode as he speaks about his personal life and the current state of his business. Thanks for listening to Part 2 of the conversation, I hope you enjoy it.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:What strategies his firm uses regarding commodities and currencies.How Aref explains his investment strategy in a concise and understandable way.Why volatility is an important source of information when making investment decisions.How to make the best of the current market environment and innovate.Why his firm evolves their model on a macro level and does not change the model every time the markets change.How QCM manages risk.Aref’s perspective on drawdowns and how to make investors comfortable with drawdowns and see them as an opportunity.How investors should be evaluating the track records of managers given that some firms’ models have changed over time.How growth and technology have effected the relationship managers have with potential investors and why it is still best to meet the manager in person.When investors ask questions of potential managers, the economic alignment question often gets left out.What it takes to be a successful fund manager: treating it like a business even if you are investing for yourself.Aref’s personal appreciation for the arts, art galleries, opera, and jazz. How it inspires him.How Aref sees the current state of QCM and why he believes in its future.-----Resources & Links Mentioned in this Episode:Learn about Long Volatility vs Short Volatility, mentioned as “Long Vol” by Aref in the episode.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer <a href="https://www.toptradersunplugged.com/resources/market-trends/" rel="noopener noreferrer"...

11 Sep 20141h 8min