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Trend Following Wizards – October

November 19th, 2012 · 8 Comments · Trend Following, Trend Following Wizards

Red October

Most of you probably heard about John W. Henry exiting the CTA business by now (articles from wsj and futures mag). It was unlikely triggered by JWH October’s performance (the road to the demise has been quite longer than this: AUM had shrunk by 95% to $100M since 2006) but looking at the report for all other wizards, there sure was little reassurance there.

Rumours and noises about trend following being dead are even resurfacing, and this October report (although one anecdotal point in history) is no exception to this “trend” of negativity. It will be interesting to see if/when there is light at the end of the tunnel. But the walls have been painted bright red for October.

The full detailed results (excluding JWH) are below. They are all negative for the month with an average of -5.21% and nearly all of them in the same position year-to-date (average YTD: -6.07%).

Organisation / Fund Return YTD * AUM **
Abraham Trading1
-2.87%
-5.52%
$422M
Altis Partners2
-3.84%
-7.37%
$951M
Aspect Capital3
-4.38%
-10.16%
$6,812M
Beach Horizon4
-4.46%
-17.19%
$738M
BlueTrend5
-6.31%
-2.42%
N/A
Campbell & Company6
-8.30%
-2.21%
$420M
Chesapeake Capital7
-5.40%
-15.71%
$598M
Clarke Capital8
-8.79%
15.95%
$44M
Drury Capital9
-4.23%
-6.05%
$350M
Dunn Capital10
-6.59%
-23.20%
$238M
Eckhardt Trading11
-7.85%
3.69%
$440M
EMC Capital12
-5.21%
6.32%
$81M
Graham Capital13
-3.93%
-4.77%
$2,725M
Hawksbill Capital14
-13.70%
-7.17%
$111M
Hyman Beck & Co.15
-2.24%
-22.47%
$360M
JWH & Co.16
N/A
N/A
N/A
Man AHL Diversified17
-3.50%
-7.80%
$668M
Mark J. Walsh & Co.18
-4.40%
-4.94%
$108M
Millburn Ridgefield19
-2.04%
-8.15%
$745M
Rabar Market Research20
-7.17%
-5.15%
$ M
Saxon Investment21
-3.54%
-1.95%
$192M
Sunrise Capital22
-4.42%
-18.97%
$394M
Tactical Investment Mgt23
-5.74%
4.74%
$95M
Transtrend24
-3.65%
0.56%
$7,044M
Winton Capital25
-2.55%
-5.85%
$28,400M
Summary Figures***
-5.21%
-6.07%
$51,936M

 

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Notes

* YTD: Year-To-Date performance.
** AUM: Assets Under Management for the program reported here (not total firm AUM)
*** The summary numbers are the mean of the monthly return and the mean of the YTD, with the total sum of AUM, across all managers
 
Note that the figures referenced in the performance table are not provided directly by any of the funds/CTAs featured in this report, but are sourced from other publications such as hedge fund/CTA websites and databases.
 
1 – Abraham Trading was founded by Salem Abraham, after he was introduced to Managed Futures and Trend Following by Jerry Parker. He is considered as a “second-generation” Turtle.
Program tracked: Diversified Program.

2 – Altis Partners started trading in 2001 and now manage over a $1B with their Altis Global Futures Portfolio. The figures referenced in the performance table are not provided by Altis Partners and no reliance should be taken as to their accuracy, and as a consequence the figures may not be in accordance with any CFTC / NFA performance reporting requirements.
Program tracked: Global Futures Portfolio.

3 – The four founders of Aspect (Eugene Lambert, Anthony Todd, Michael Adam and Martin Lueck) were significant members of one of the most succesful funds in managed futures – AHL (Adam, Harding and Lueck).
Program tracked: Aspect Capital Diversified Program.

4 – Beach Horizon was created as a fully automated trend following subsidiary of Beach Capital Mgt, founded by David Beach. Two of the founders of Beach Horizon had early involvement in AHL.
Program Tracked: Managed Account.

5 – BlueTrend, from BlueCrest Capital, is one of the largest Trend Following funds – headed by Ms. Leda Braga.
Program tracked: BlueTrend Fund Limited.

6 – Campbell & Company is one of the oldest Trend Following firms, operating for around 4 decades.
Program tracked: Global Diversified Large.

7 – Chesapeake Capital was founded by Jerry Parker, a former Turtle.
Program tracked: Diversified Program.

8 – Clarke Capital was founded by Michael Clarke in 1993.
Program tracked: Millenium Program.

9 – Drury Capital, Inc., was founded in Illinois in 1992 by Bernard Drury.
Program tracked: Diversified Trend-Following.

10 – Dunn Capital was founded by Bill Dunn.
Program tracked: World Monetary and Agriculture (WMA).

11 – Eckhardt Trading is the firm managed by William Eckhardt, who co-led the Turtle experiment with Richard Dennis.
Program tracked: Standard Program.

12 – EMC Capital was founded by Liz Cheval, a former Turtle.
Program tracked: EMC Classic Program.

13 – Graham Capital was founded in 1994 by Ken Tropin, previously a Director of JWH.
Program tracked: K4-D10.

14 – Hawksbill Capital was founded by Tom Shanks, a former Turtle.
Program tracked: Global Diversified Program.

15 – Hyman Beck & Co. main principals are Alexander Hyman and Carl Beck.
Program tracked: Global Portfolio.

16 – JWH & Co. was founded by John W. Henry, now also owner of the Boston Red Sox.
Program tracked: Global Analytics.

17 – Originally ED & F Man, a commodities broker business founded in 1783. Man became a succesful CTA starting in 1983, when partnering with Larry Hite’s Mint Investments. Subsequently Man gradually acquirs AHL (1989-1994) to form Man AHL: the systematic trading division of the Man group.
Program tracked: Man AHL Diversified Futures Ltd.

18 – Mark J. Walsh was not an official Turtle but trained and worked closely with Richard Dennis before starting his own fund management business.
Program tracked: Standard Program.

19 – Millburn Ridgefield have been trading Trend Following models since the early 1970′s.
Program tracked: Diversified Program.

20 – Rabar Market Research is the company of Paul Rabar, a former Turtle.
Program tracked: Diversified Program.

21 – Saxon Investment was founded by Howard Seidler, a former Turtle.
Program tracked: Aggressive Diversified Program.

22 – Sunrise Capital is a CTA based in San Diego. Founded in 1980 by Gary Davis, it merged in 1995 with Commodity Commodity Monitors, Inc., founded by Rick Slaughter in 1977.
Program tracked: Expanded Diversified Program.

23 – Tactical Investment Management was founded by David Druz, student of Ed Seykota.
Program tracked: Institutional Commodity Program.

24 – Transtrend is a Trend follower CTA based in Netherlands.
Program tracked: DTP – Enhanced Risk (USD).

25 – Winton Capital is a London-based CTA founded by Dave Harding (also co-founder of AHL).
Program tracked: Diversified Program.

 
 
These are the top CTAs/Managed Futures funds in the Trend Following space with:

  • Decades of successful track records (some managers approaching half a century such as Millburn or Campbell, founded in 1971 and 1972 respectively, with other pioneers following suit a few years later: Sunrise, John W Henry, Dunn, etc.)
  • Legendary stories and experience: the most famous of them being the Turtle Traders experiment led by Richard Dennis in the eighties. Nearly a third of the list originate from or were associated with the Turtles (Liz Cheval, Jerry Parker, Bill Eckhardt and more – check the foot notes for details). Also in the list is David Druz, an early “disciple” of computerized trend following pioneer Ed Seykota.
  • Billions of Assets under management: the list captures most if not all of the top Trend Following managers in terms of AUM, including the “super-large” that are Winton, Man AHL, BlueTrend or Transtrend. Collectively, the Trend Following Wizards manage close to $100 Billion.
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8 Comments so far ↓

  • Jens

    Lynxhedge CTA that I personally follow (part of Brummer & Partners Sweden’s largest hedge funds) had a very rough October as well at -6.19% ..

  • CL1

    Hi Jez – Is there a reason you don’t report on ISAM (Larry Hite/Stanley Fink)?

  • Jez Liberty

    CL1 – Not really and it would be a good addition to the list actually. They might have not been publishing their performance at the time I compiled or reshuffled the list but I double-checked and found them on IASG, so I could include them.
    Thanks!
    Jez

  • Federico

    Hi Jez!
    I’m Federico from Italy.

    First of all I’m a big fan of your blog so let me say you’re doing a really good job! ;)

    It’s about one year now that I’m considering investing in a trend-following fund (not did yet) so you may imagine how hot is this month’s topic for me and the reading on the attain site is really interesting.
    The fund I’m considering investing is Man’s because of the relatively low minimum and not so bad performances.

    Here is what I’m thinking about:
    Man performed worse than average in the last 4-5 years so it would be both a good occasion to target the return to the mean but also a symptom that it has lost some hedge in confront of the competitors.
    (exactly an useless “technical analysis-like” consideration)

    Here I try to think more usefully: are the market conditions going to turn favorable again for trend-following?
    Obviously we don’t know but if I have to make an inference with the only data of the average performance of trend-following funds I can’t ignore how this trading way has lost a big part of his edge in the last 5 years and, more important, I can’t find a similar pattern of so poor&prolonged performances in the past (I mean that if people say TF is dead now, in effect, it’s a little bit different from other times people said the same thing and TF powerfully resurrected).
    Here an excel spreadsheet with some chart I did to have a graphic idea http://www.freeuploadsite.com/do.php?id=638
    This little intro to say that sincerely I’m not so confident that there will be a good recovery in TF (even if it’s my hope).

    What do you think about my reasoning? Seems correct or you find some major mistake or important fact that I’m not considering?

    PS. Sorry for my poor english

  • Jez Liberty

    Hi Frederico,
    Thanks for the comment and your interesting spreadsheet.
    I see your point (important to consider)… and I wish I could have the answer!

    One thing comes to mind though when you say that “it’s a little bit different from other times”, the saying:

    “History never repeats itself, but it often rhymes”

    So, who knows, maybe we’ll have a strong rebound (maybe this time it’ll be a little bit different and it will be longer/stronger, or not..). I also like the idea of Adaptive Market Hypothesis, maybe this is a period of “natural market selection” (clearing out the “weak hands” in trend following) with the trend following edge returning thereafter.

    An argument that makes me think that trend following should keep working is that its basic philosophy is based on human behavior that does not change (despite all the advances in technology).

    It is a bit tongue-in-cheek to quote John W. Henry at this time:
    “If you have a valid basic philosophy, the fact that things change turns out to be a benefit. At least you can survive. At the very least, you will survive over the long term. But if you don’t have a valid basic philosophy, you won’t be successful because change will eventually kill you. I knew I could not predict anything, and that is why we decided to follow trends, and that is why we’ve been so successful. We simply follow trends. No matter how ridiculous those trends appear to be at the beginning, and no matter how extended or how irrational they seem at the end, we follow trends.”

    So, if you believe in the philosophy, survival is key, profits will come over the long term… “Belief” being the defining term here.

  • Fred

    The Attain Capital article that Jex provided a link to is an interesting article read. A 20-month drawdown isn’t much fun but that is what many TF funds are experiencing.

    I am ahead of the Newedge indices that I benchmark my trading performance against but it would be nice to have a double digit CAGR instead of being a little better than flat after two years.

  • Pete

    what a great article. I believe this is the best time to invest in trendfollowing funds.

  • Investment Warrior

    Even with trend following, my data, going back to 1900 indicates that you need at least a 7 year time period for trend following “noise” to have some degree of shaking out.

    Realize that with buy and hold, that this time period is as high as 25 years.

    Any time period less than 7 years is meaningless.

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