“Benchmarks in our industry are like taking a fruit salad and comparing it to an apple.” – Kathryn Kaminski (Tweet)
Welcome to Part 2 of our conversation with researcher and co-author of one of the definitive books on trend following. In this conversation, we dive into the the models that she used in writing the book, as well as her thoughts regarding risk management, what you should be asking a manager during due diligence, and what the future holds for the managed futures industry.
Thank you for listening and welcome to the second part of our talk with Kathryn Kaminski.
In This Episode, You’ll Learn:
- What Kathryn looks at when evaluating the track records of managers.
- Her thoughts on the recent performance of trend followers.
- About price range compression.
- If she has a favorite statistic to look at when analyzing a manager.
- How she and her co-author came up with the trading strategy that they use in their book.
“We focus on position sizing; creating one key formula which is a function of several key variables.” -Kathryn Kaminski (Tweet)
- Why the exit from a position is just as important as the entrance.
“The point of a trend following strategy is that there is both the entry and the exit.” -Kathryn Kaminski (Tweet)
- What trend leakage is.
- Her views on how inflation and other environmental changes affects trend following strategies.
“Extreme environments tend to have divergence, and thus more opportunities for trend followers.” -Kathryn Kaminski (Tweet)
- About diversification.
“There are pros and cons to how much you diversify your process.” -Kathryn Kaminski (Tweet)
- About risk management; how Kathryn defines risk and what is important to look at in risk management.
- Kathryn explains the topics of hidden and unhidden risk.
- What kind of drawdowns should be expected from a trend following model.
“When you look at trend followers, they have a lot more drawdowns over time than equity, but they are way shorter.” -Kathryn Kaminski (Tweet)
- A discussion of the drawdowns that trend followers have experience in the last few years.
- Seeing drawdowns as a buying opportunity.
- How to detect if a manager’s models and system has stopped working.
- The biggest challenge for the CTA industry right now.
- What she would ask of David Harding.
- What questions investors should be asking of managers when doing their due diligence.
- What personalities traits a good trend following manager should have.
- Her thoughts on regulation, especially for smaller managers.
- What her plans are for the future and how she sees the managed futures industry going forward.
Resources & Links Mentioned in this Episode:
- Kathryn’s book is: Trend Following with Managed Futures.
- 4 Key questions of trend following:
- Determine when to enter
- How large of a position to take out
- How to get out of the position
- How much risk to allocate to a particular position
- Is this Time Different? Trend Following and Financial Crisis.
- Books that Kathryn recommends:
- Kathryn’s TED talk on Convergence and Divergence.
This episode was sponsored by Swiss Financial Services:
Connect with The Institute for Financial Research, Stockholm (SIFR):
Visit the Website: www.sifr.org
Call SIFR: +46-8-736 91 01
E-Mail SIFR: firstname.lastname@example.org
Follow Kathryn Kaminski on Linkedin
“In my opinion, risk management is the greatest asset of the CTA industry.” – Kathryn Kaminski (Tweet)