TTU20: How to Identify Trades No One Else is Looking For ft. Roman Lutz of Future Value Capital – 2of2
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 670 Ratings
🗓️ 7 August 2014
⏱️ 61 minutes
🧾️ Download transcript
Summary
How would it feel to identify trades no one else you know is looking for?
Our guest is back and this interview is all about carry trades, mean reverting environments, merger arbitrage, volatility arbitrage, tail hedges and how to become the best trader possible. It’s quite likely there is something in this interview which will help propel you forward as a hedge fund manager or in your research of managers.
Welcome back to the second part of our interview with Chief Excutive Officer of Future Value Capital, Roman Lutz.
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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE
In This Episode, You’ll Learn:
- Simple Models used by Future Value Capital to implement trend following
- How they utilize carry trades
- The third area of models: Tail Hedges
- Learn about how to carry potentially large value variance swaps while keeping the premium for holding them down
- Where the variance exchange swaps derive from whether from OTC with counterparts or constructed using exchange listed products
- Learn about Credit Support Annex (CSA)
- Risk management procedures at Future Value Capital
- The purpose for tactical asset allocation meetings and the decisions that are made
- The common performance drivers and if there is a dominant part of the portfolio that is responsible for the performance
- How Roman translates the complex trading strategy of Future Value Capital to investors
- How Future Value Capital implements trades and why they consider it a key strength of their program
- How much AUM would be optimal running the program or if the potential is unlimited
- How to create certainty around the risk Future Value Capital holds and how they define that risk
- What Roman Lutz considers to be one of the riskiest thing that could happen in the financial system
- What to expect in terms of returns and drawdown when investing in Future Value Capital
- How to realize when a model is no longer working
- Personal habits that contribute to Roman’s success in managing a hedge fund
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Transcript
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| 0:00.0 | You're listening to Top Traders Unplogged, episode number 020, where I continue my conversation |
| 0:06.8 | with Roman Lutz, managing partner of future value capital. This episode is sponsored by Saxo Bank |
| 0:13.9 | and Swiss Financial Services. Welcome back to Top Traders Unplugged, where the best traders in the |
| 0:20.5 | world come to share their experiences, their successes, and their failures. |
| 0:24.8 | Let's rejoin the conversation with your host, veteran hedge fund manager, Niels Kastrop Larson. |
| 0:33.6 | I'm good. But I would actually be interested in hearing from you how you do trend following. |
| 0:47.1 | I mean, in just broad speak, how do you implement it? |
| 0:53.7 | We use very simple models. |
| 0:55.8 | So typically moving average crosses. |
| 0:58.7 | And we use a combination of like a short model and with a longer term model. |
| 1:06.4 | Typically the longer term model is the dominant model because we want to minimize transaction |
| 1:14.3 | costs. |
| 1:15.3 | So you don't want to trade in and out every day. |
| 1:18.2 | So we basically want to capture long-term trends. |
| 1:21.9 | It's also different. |
| 1:22.7 | You know, our momentum strategies have a different function in the portfolio than they do, for example, |
| 1:32.7 | with a CTA. |
| 1:34.2 | In CTA, they have to generate performance. |
| 1:38.2 | In our case, it's good if they generate performance, but if they don't it's not so bad because we have |
| 1:48.6 | other strategies especially in a in a mean reverting or in a non-trading environment which should |
| 1:55.2 | perform well like merger arbitrage or volatility arbitrage or carry you know a carry trade |
| 2:00.7 | is is a mean reverting in my rent where, you know, as the prices are not moving |
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