TTU38: The Real Secret Behind Trend Following & How It Works ft. Martin Lueck of Aspect Capital – 2of2
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 670 Ratings
🗓️ 9 October 2014
⏱️ 69 minutes
🧾️ Download transcript
Summary
In the second part of our conversation with AHL founder and Aspect Capital Director, we dive into the details of his firm’s strategies and models. We explore how the models evolve, how he deals with risk management, and his advice for would-be fund managers. Investors and managers alike will gain deep knowledge from this episode.
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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:
- How their model changes are very small and gradual.
- What the Diversified Program of Aspect looks like today.
- How Martin weights the portfolio between financial markets and commodity markets.
- How his model allows them to grow the company.
- About foreign exchange markets and liquidity.
- The 2008 crisis and how it affected their models.
- The real secret behind trend following and how it works.
- How they are making the transition to a “box-to-box” execution approach.
- How Martin defines risk and risk management.
- About model risk.
- How their risk team operates.
- Why correlations are a crucial to look at.
- How drawdowns are different than open-ended risk and how to explain that to investors.
- Why succession planning is not an issue for the company right now.
- What his biggest challenge is.
- The evolution that is going on in the managed futures industry in general.
- How small firms are struggling but may see opportunities in the future.
- What Martin would ask David Harding if he were interviewing him.
- What investors forget or don’t know to ask.
- Martin’s advice for managers or would-be managers.
- A vacation the Martin took his family on, that turned traumatic for a moment and that British Airways learned a lot from.
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Resources & Links Mentioned in this Episode:
- Martin suggests books by Antti Ilmanen.
- Learn more about David Harding and Winton Capital Management.
Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.
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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.
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Transcript
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| 0:00.0 | You're listening to Top Traders Unplugged, episode number 038, where I continue my conversation with Marty Lewick, co-founder and director of research of Aspect Capital. |
| 0:12.5 | This episode is sponsored by Swiss Financial Services. |
| 0:16.9 | Welcome back to Top Traders Unplugged, where the best traders in the world come to share their experiences, their successes, and their failures. |
| 0:24.9 | Let's rejoin the conversation with your host, veteran hedge fund manager, Niels Kastrop Larson. disintermediation of the interbank market. |
| 0:43.9 | Do you remember that? |
| 0:44.7 | Yes. |
| 0:45.4 | So, you know, as it became more democratized and everyone had access to the same price feeds, |
| 0:52.3 | well, you know, the bank trading desks, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, you know, the, the, the, you know, the, the, you know, the, the, you know, the, the, you know, the, the, you know, the, the, you know, the, the, to the early point about being picked off. So what that told us was that we just had too much of a market impact. |
| 1:15.3 | We were too visible to the markets. |
| 1:17.2 | So around that period, there was a same effects we were capturing Neos, but in a different |
| 1:24.0 | way that meant that our entry and exit to the markets was much, much smoother |
| 1:28.6 | and effectively invisible. |
| 1:30.2 | So since then, you know, huge development and huge focus on execution to make it, to really |
| 1:37.7 | obfuscate what we're doing, to dribble our trades into the markets in random pieces, at delays and really, you know, try and exploit |
| 1:49.5 | the market volatility rather than forcing our business to get done as quickly as possible. |
| 1:55.7 | Sure. Interesting. And so, sorry, you then, so that was a sort of starting place to describe what aspect, what the diversified program looks like today. |
| 2:08.7 | In talking about the grand sweep of how the program has evolved, you know, it has remained predominantly medium-term trend following. |
| 2:19.0 | That is what we are committed to delivering to our clients. |
| 2:24.6 | So, you know, you go through a challenging period for trend following. |
| 2:27.9 | The temptation is to introduce other models or to change the weights, either to reflect what would have worked or to reflect what you think will work, |
| 2:39.9 | we don't think that's our place. |
| 2:42.2 | It is for some other firms because they've sold themselves as, you know, multistrat or whatever it is. |
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