272 Systematic Investor Series ft. Andrew Beer – December 2nd, 2023

[00:00:00] Intro

You’re about to join Niels Kaastrup-Larsen on a raw and honest journey into the world of systematic investing and learn about the most dependable and consistent yet often overlooked investment strategy. Welcome to the Systematic Investor series.

[00:00:23] Niels

Welcome and welcome back to this week’s edition of the Systematic Investor series with Andrew Beer and I, Niels Kaastrup-Larsen, where each week, we take the pulse of the global market through the lens of a rules-based investor. Andrew, it’s always great to have you on. This week is no different. How are you keeping? Where are we finding you today?

[00:00:41] Andrew

Well, thank you so much as always for having me back on. I am in the New York City area getting ready for the holidays. Things are mostly good, perhaps with the exception of a lot of people having walked into a propeller about a month ago when Powell decided to give some legs to the pivot or the taper trade. But all together, nothing to complain about.

[00:01:06] Niels

Yeah, absolutely. It’s great to hear that you’re doing well. Of course, I can’t wait to get into our conversation today where one of the topics we will discuss will be something along the lines of how bad 2023 is when it comes to CTAs, as you rightly alluded to, not least thanks to the very early Santa Claus rally in stocks and bonds we’ve had in the last few weeks.

But as usual, before we do that, I’m also interested in hearing what you’ve been paying attention to, maybe a little bit outside of our usual topics and what you’re finding interesting.

[00:01:49] Andrew

I’m always interested in just the broad industry structure and where things are changing. We may talk about it later, but I think just what’s happened with 60/40 portfolios and what that means for the wealth management industry and how that’s going to change over time. I’ve been focusing just on what evolution, what progress, what democratization looks like. not wildly different themes, but always every month, every quarter, I get new information, new angles, talk to more interesting people, so this has been a steady progress on that front.

[00:02:25] Niels

Perhaps you’re sitting back being very sort of, I wouldn’t say smug is not the word, but happy that you didn’t use Chat GPT to power your replication model.

[00:02:36] Andrew

We were talking briefly about artificial intelligence, and I don’t know anything about it. I can barely type in questions in Chat GPT. But I did get somebody who reached out to me the other day and said, are you worried that artificial intelligence is going to ruin the managed futures space? I had to remind him about machine learning. Machine learning was supposed to ruin the managed futures space, and it worked for a period of time, and then it stopped working.

And then big data, and it’s like, oh, my god, we’re going to have all this data. I’m like all that means is you’re going to have more crappy data. What is good about knowing what people are tweeting about? So look, I’m skeptical with AI. AI does seem like it’s something completely profound in terms of what it’s doing, but whether that translates into actionable investment ideas or creates opportunities for people who don’t think like Chat GPT will be interesting to see.

[00:03:40] Niels

Absolutely. Of course, I only brought this up because as I was telling you, yesterday, we recorded an upcoming episode in the Galactic Macro series with someone who must be one of the smartest people I’ve come across and the topic is quantum mechanics, and so it couldn’t be more topical when it comes to what took place over at open AI in the last month or so.

Anyways, let’s bring it back to Earth and let’s talk about trend following performance before we dive into the topics. We, you and I, are recording on December 1st, and I do think it makes sense to recap the month a little bit instead of just the last week like we normally do. In November, trend following strategies faced a tough challenge, pretty much the toughest one we’ve seen since the bank debacle back in March.

The performance suffered from market reversals, really across bonds and currencies in particular as far as I can tell. But also, depending on the speed of your models, maybe equities could have been a challenge. There were very few individual commodities, as far as I can tell, that would have had some good trends. The rest of the commodity complex probably were pretty mixed, maybe even down a little bit.

To a large extent, these strong reversals were really initiated by that CPI number and some comments later on from the Federal Reserve. Of course, now the market does have very strong expectations that interest rate hikes are done and we’re just sitting here waiting for the first ones to show up as interest rate cuts.

What has been interesting, and maybe we’ll talk about that also later today, is that CTAs and trend followers in particular seem to have been, I would say, almost perfectly negatively correlated to equities. I was counting our own performance and I think eight or nine of the month so far, we’ve been opposite in terms of performance to a long-only equity index like I think MSCI World or S&P.

You could say, if you just put 50/50 amongst trend following and long equities, you wouldn’t have had a big down year last year in your portfolio. You wouldn’t have had a strong up year this month or this year. You would have been pretty flat in both years. So that’s kind of a little bit of a benefit of what they call return stacking, which, incidentally, is something we’re also going to talk about today, Andrew. So I’m trying to get it all lined up for you here, as you can tell.

[00:06:19] Andrew

All lined up in a row.

[00:06:20] Niels

Exactly. My own trend barometer finished at 43, which might actually suggest that, oh, not a big deal, it was a little bit of a negative month. But actually, it recovered pretty strongly the last couple of days and that’s why I think when we see the final numbers, they’re not going to be too bad, but they’re not going to be pretty either. As of the 29th of November, the BTOP 50 was down 2.63%, down 84 basis points for the year, so no big deal.

SocGen CTA Index is down 3.32% for the month and down 2.59% for the year. No big deal, in my opinion. The Trend Index down 4.67% and down 3.65% for the year. Again, not a big number. The Short-Term Traders Index did a little bit better, down about 1% for the month and down 2.28%.

But of course, it was an incredibly strong month for equities and bonds. MSCI World up 9.25% in November, up 16.17% for the year. World Government Bond Index up 3%. I think that’s like the best single month in I don’t know how many years, more than a decade perhaps, and the S&P 500 up 9.13% and that makes it up 20.8% so far this year.

Now, of course, when people hear about how well equities are doing, we shouldn’t forget that there is something called the Magnificent Seven. As far as I can tell, if you pull out the Magnificent Seven from these performance numbers, equity returns in the S&P come down to a much more reasonable level of around 8% or so. Nevertheless, we can’t do that of course. They are included.

Andrew, you very kindly sent over some very interesting topics that are highly relevant. As we get closer to the end of the year, your first topic, I think, is good to talk about. You kind of just wrote, “Just how bad is 2023 for managed futures?” Do you want to dive into that and we’ll take it from there?

[00:08:32] Andrew

Sure. Well, one of the things I think, obviously the big difference between 2023, so the SocGen CTA Index. as you say, it’s probably going to be down two to three-ish or something by the time we get to the end of this month, which is no big deal. It was up 20% last year. Underneath the surface, the thing that I think is really interesting is that the trend is underperforming.

If you look at the five largest managed futures mutual funds in the US, so that’s Abbey, PIMCO, Man AHL, AlphaSimplex and the LoCorr Macro Fund, they’re down on average 5.6%. What happened is those funds, basically, when we started looking at the space back in 2015, and you asked a typical allocator what do you think about managed futures, everyone knew that it had trend and it had non-trend underlying strategies, but the non-trend stuff was the popular stuff back then.

Winton had made this very public pivot away from trend and there was belief that trend was getting commoditized, and, therefore, the big boys should focus on non-trend strategies. Then in March of 2020, something unexpected happened, which was the SocGen CTA Index was flat-ish or something, when equities went down a lot, but trend went up 5, 6. You guys went up more. I think you guys were up 9 or something.

So all of a sudden, guys who were trend guys did really well in March 2020. They tended to outperform that year and then they outperformed in 2022 as well. So there was this period of time, as I was talking to people over the past several years, it’s all been about trend. Trend is the place to be, trend is the place to be.

But if you look at the SocGen CTA Index and you assume that the trend guys on average are let’s say down 5 or 6 and the SocGen CTA Index is down 2 or 3, it means that the non-trend guys are probably flat-ish or doing better. What I’ve noticed in conversations recently is this pivot of people saying (like Graham, John Hancock has a mutual fund managed by Graham in the US), all of a sudden people are talking about that because they’re up a little bit.

In Europe, it’s the same kind of thing. I think what’s hard about this year is that we’re supposed to be, in a bad year, we’re supposed to be hovering around cash. We’re all supposed to be up 4-ish this year. But instead, we’re down whatever. We’re down mid-single digits or in some cases greater.

The idea that we’ve been waiting for our cash returns to be higher has undercut this year by the fact that the percentage losses of the futures contracts have been quite bad because it has been a really, really nasty year from a whipsawing perspective. It’s a lot to talk about, but I think it’s been a tough year.

[00:11:20] Niels

Yeah. Let me query something, and maybe I misunderstood it or misheard it. I understood you from saying that the SocGen CTA Index, not to be confused with the Trend Index, only had a few big trend followers in there. But when I look at the index, I would say it’s actually predominantly trend followers even in that index as well. There are a few like Quest maybe, Crabel of course. I don’t see many others that are what I would define as non-trend. Did I misunderstand?

[00:12:03] Andrew

Maybe I didn’t speak clearly. The way SocGen says, we’ve got 20 guys and we’re going to label 10 of them trend and 10 of them non-trend. The reality is it’s like an overlapping Venn diagram. As you say, it’s hard to find a guy there. Maybe you had Fort, who is counter-trend, or maybe you have somebody who is doing something materially different. But clearly, the main driver of the SocGen CTA Index overall returns is trend.

If you look at the trend sub-index versus it, it’s like a 1.2 version of the SocGen CTA index. So no, rather what I’m saying is just from an investor perspective, investors themselves. When they say, I want managed futures, what do they say that they want? I’ve noticed this evolution that, a year ago I would say, people would say to us, if you’re picking up on the trend, on underlying trend, we want that.

Whereas in recent months, it’s been more of, well, what are the limitations of long-term trend? Why don’t you have a lot of short-term trend stuff? Why don’t you do things that are again focusing on other parts of it? I think that’s just recency bias in terms of what they’re looking for.

[00:13:18] Niels

What’s always been interesting to me, because there’s been so many periods where trend has been out of favor compared to other things. If there’s something new, it’s always the new shiny tool that gets people’s attention. They think it must be better because it’s new. I do remember when the short-term traders started to emerge, probably around the year 2000, I would imagine. Not many of them, and a few more have come since.

I think the Short-Term Traders Index goes back to around 2009. But from memory, and I wasn’t sure that we were talking about this today, but from memory, even if you vol adjust it, the short-term strategies have not done as well as trend following. It’ll be different. So that warrants some allocation, maybe, to other types of strategies.

But the other thing I just want to say, which I find interesting, and that is, that even within the short-term space you can certainly find managers that actually include trend following in their model (I don’t mean short-term trend following, I mean longer-term trend following), but they’re still labeled as a short-term trader because they have all the vol breakout type strategies as well.

I don’t envy investors trying to figure out exactly how to classify some of these strategies, certainly not without a very detailed conversation with the manager.

[00:14:49] Andrew

When I look at it from a due diligence perspective, and thinking about if I were picking managers and investing in them, it’s really hard in the space. Again, I’m just relaying a conversation, but when Winton said that they had basically turned away from trend, I spoke to a guy there and he said, yeah, we used to consider ourselves 65% trend, now we’re 35% trend. It was still there, but the marketing positioning was that it had somehow become far less important than what they were doing. They had very good reasons for doing that in the context of the competitive landscape.

I’m really fascinated with this issue now because when I hear people talking about this fund uses a lot of short-term models, one of the truisms I think of this space is that people have coalesced around steadier, longer-term models. When you do look at them over a period of time, they tend to have done a lot better. We run our own models internally, we don’t invest in them. But just to get a favor, and it’s a sanity check when you’re replicating, you kind of want to see what different models are doing.

We see the shorter-term models generating much lower Sharpe ratios over time. We actually don’t see them controlling risk better than the longer-term models. So the appeal of the shorter-term model is this myth of nimbleness. In March, in a couple of weeks after we hit the propeller with SVB in March, there were guys who pivoted out of their positions faster. They had better margins than everybody else, and that was all they could talk about. Those who are the ones you hear from as an allocator. Somebody doesn’t say, yeah, I was holding on to those, my short treasury positions, with a white knuckle grip through not just SVB, but the regional banks and then Credit Suisse. You hear about the guys who, when something worked.

But then if you look at a lot of those guys over the next several months, rates rebounded. Holding on to those positions through that volatility was actually a much better position to be in over the next several months. So I think the hard part is when you look at something like short-term, it sounds so appealing. Of course, I want to get in earlier and I want to get out earlier and I want to capitalize on that. But the problem is that you also get whipsawed an awful lot more.

When you look at the drawdowns of the shorter-term models, at least as we see it, yes, you don’t get hit maybe in the same way. For instance, when we look at short term models in November, we see them cutting risk pretty quickly, and therefore maybe having half the drawdowns or less than half the drawdowns of a long-term model last month.

But when the shorter-term models do badly, it’s because they get whipsawed back and forth, back and forth, back and forth over six months or eight months, and that results in the same kind of drawdown. So I think the point is that there are different ways of skinning this, but the starting assumption is that we figured out a necessarily better way to do this. We just haven’t seen evidence that there is one particular way that’s going to work better in all sorts of different market environments.

[00:18:01] Niels

Yeah. I think that’s definitely fair. To be fair, because I remember we had this conversation last time, I just want to remind people that when I spoke with Winton earlier this year, they of course don’t see themselves as having turned away from trend per se during that period. Just for the record, people can go and listen to Simon talk about how they interpret that situation.

Anyways, this brings us to replication to some extent. I’m curious before we dive into more on the replication side, is there such a thing? You say we look at shorter-term models, and by the way, actually, at the firm I work for, we do run a trend following basic model and the only thing we change is the lookback period to visualize the performance; if the only change is a lookback period, how it changes over time.

It is exactly as you say, that there will be times, there will be 2008, there will be a 2014, there will be a 2022 where clearly short-term did super well, but so did everything else. Then there’ll be a few years where, yeah, short-term maybe did better than longer term, but it is far, far, far less consistent. There’s no doubt about that. So I completely agree with that.

Anyways, what I wanted to ask you, before we dive in, maybe you can talk a little bit about the history of replication for those who are new to this. But in replication, if you look at the replication model, is there such a thing as a timeframe, a lookback period when you do replication where you have to make a call (and I don’t know if that’s a discretionary decision or how you do it) where you say, yeah, 65 days seems to be how we can get closer to the index?

[00:20:08] Andrew

Sure. The whole history of replication starts in two different areas back in 2006, 2007. The area that we started, there was a professor at MIT named Andrew Lo, who was one of the gods of academic research on hedge funds. He was also the founder of AlphaSimplex. He wrote a paper with a graduate student named Jasmina Hasahodzic that basically applied a risk model to the broad hedge fund industry. You have to understand, this is August 2006 when, I think, it was published. It’s certainly the first time that I read it.

I think what you have to understand is that the hedge fund industry in the 2000s was starting to get institutionalized. When strategies institutionalize, it’s not Bill Ackman going out and trying to convince pension funds to have this in their portfolios. It’s consultants who, for their own reasons, have seen hedge funds preserve capital through the dot-com crisis, they’ve made a major pivot into emerging markets, they’re having a great first five or six years.

So it’s consultants competing with each other to get that new mandate, who then pitch their sophistication in this new strategy. The other 95% is easy. The other 90% is easy, but we’re experts in this particular area and we’re going to help bring you access to it. So hedge funds, private equity, private credit, etc., it’s all driven by people at the allocation level. They are not the guys who are actually running the hedge fund, so they have to create their own stories as to why they should be in a portfolio.

The story around hedge funds was, if you’re talking to a real hedge fund manager at the time, they were like, whatever, let them say it, it doesn’t mean it’s true. So hedge funds are these nimble guys who are going sidestep, they’re going to see the train coming down the track and jump off the tracks. They make all this money from identifying these idiosyncratic opportunities on the short side.

It was all of these stories that institutional allocators and fund of funds had created to convince people that hedge funds had not had a great several years out of luck, but it was this thing, this talented thing of these all-stars who are going to make money over the next several decades. That’s how the hedge fund industry basically went from being a cottage industry to being this multi-trillion-dollar industry.

What replication did was it basically shone a light on the fact that a lot of that was nonsense. Guys said, well, we only pick the top quartile managers. If you could pick in advance the top 20% or 25% of hedge funds every year, you’re up 30% a year. It’s like saying we only pick the stocks that go up. Hedge funds weren’t that nimble. In fact, across equity long-short, they were making these multi-year trades.

So this paper came out and guys who knew hedge funds were looking at it and basically saying, of course, it makes sense. What the paper was saying was that it’s not that big of a mystery how the broad hedge fund industry makes money. If they are long value and short growth on average going into the dot-com crisis, they’re going to do great. If they’re long emerging markets in 2003, 2004, 2005, they’re going to do great; if some of them are long subprime.

So replication was pointing out that which hedge fund managers actually knew, but it turned out that it completely undermined the story of what it was about hedge funds. Because consultants and others would say, we don’t pick the average hedge fund, we only pick the best ones, etc. So Lo writes this paper, and then AlphaSimplex, Goldman Sachs, does the research, Merrill Lynch, Credit Suisse, anybody with a decent risk model.

That’s when I got interested in the business because I thought if you could solve this, then you could create the SPY, the GSCI, of the hedge fund industry. What I totally underestimated was how much the people who were in the business of selecting hedge funds, who actually control the capital and create these narratives, would hate replication. Because it was like this simple, cheap thing that was coming along and ruining the party of we’re going to help you get into this exclusive club with only the guys who are tomorrow’s all-stars.

So that’s what we call top-down replication. It’s what we do and we stuck with it because it’s the best thing we found basically if you want index-like exposure to a hedge fund category. It works only in two limited circumstances, which is figuring out what the broad hedge fund industry is doing, what equity long-short is doing, and how these slow-moving factor trades are going to drive performance over time. We think it works very well in managed futures as well, but you have to do it on a shorter-term basis.

So the whole idea of it is we’re not going to invest in hedge funds, we’re not going to try to be better than the hedge funds themselves, we just try to figure out what they’re doing, what are the biggest rates and copy it cheaply, and then you keep adjusting it over time. So you thought there was this a month ago or a week ago, and as they change, you try to change.

The other second kind of hedge fund replication was pioneered, I think, by Cliff Asness. He wrote a paper in 2006, I think it was in 2006, called “An Alternative Future: Part II”. He was basically addressing the whole idea of what do we mean by beta and what do we mean by alpha. The concepts of alpha and beta among most allocators were very rudimentary. Alpha is this magical mystery thing that geniuses do and that finds opportunities that nobody else can find, and beta is the simple stuff.

He basically said, no, it’s a lot more nuanced, that you can look at a particular strategy, like merger arbitrage, and maybe you should think about whether you need to pay a lot of different guys 2 and 20 to get exposure to that, if when you look at them in aggregate, maybe you’re better off just buying every time somebody says they’re going to buy a stock, you buy it and you short the acquirer. So that eventually became called the alternative risk premia space.

So it really was, in a sense, a form of replication, but they called it bottom-up replication. Those have been the two principal ways that people have sought to take this thing that hedge funds do, this value that they create. But yet, by disintermediating the hedge fund structure, which itself is very expensive, illiquid, etc., the idea was this may allow us then to bring some of the good things of hedge funds but deliver it with lower fees, daily liquidity, etc.

The alternative risk premia space took off like weeds in the 2010s. It was disappointing to what I think is a staggering degree. A lot of the funds that were doing it have gone away or they pivoted or changed what they do, but those were the two. That’s the historical perspective on it if anybody comes in and tells you that they’re doing these things.

[00:27:01] Niels

When you explain it like that, it reminds me of a conversation I listened to not long ago where I think you were talking with Corey Hoffstein. I can’t remember if it was his podcast. Yeah, I think it was his podcast. And then was it Adam you had on the other side?

[00:27:22] Andrew

Yeah, from ReSolve. They’re partners in launching ETFs in the US.

[00:27:26] Niels

Exactly. Can you talk a little bit? When I hear this history, clearly, there’s a starting point, then I think you guys, it’s the next phase where you come in and you say, well, we can do this and successfully, you raise a billion dollars in no time. That has spurred even more interest, I think.

Now we’ve seen the ReSolve guys come in with a different approach to this. So can we talk a little bit about the advantages, disadvantages of that? I’m going to take it to another level after that.

[00:28:06] Andrew

Corey very graciously invited me to join him on his podcast and we talked about this. Corey and Adam, they say both work, both are valuable, let’s do both. To take the AQR model and to apply it to managed futures is to say we are going to build a simple and straightforward trend following model that we think is representative of the overall space and we think it’s going to roughly approximate the returns and the overall space over time. That is a perfectly legitimate approach.

This is what banks were doing in the mid 2010s. If you looked at what a GSA or something was doing, it seemed like it was a similar idea. So I basically laid out how we approach it. We’re very unusual in quant land in that our goal is to get to the simplest, most straightforward answer we can get to, even if it’s not sexy and it’s boring and feels too simple.

When quants, in general, have done things in the replication space, there’s this kind of gray area. In theory, perfect replication would be everybody emails all their positions in the morning and we simply invest in those positions at exactly the same weights and we track the SocGen CTA Index with 100% correlation and we cut out fees, etc. Obviously, that’s not happening.

The reason we do what we do, and what we do is every week, we basically look at the past few weeks of the broad industry and try to infer, are these guys still short treasuries, and if so, how do we think it’s distributed across the curve? Do we think they are broadly short equities, and if so, are there geographical biases to it? So we’re trying to come up with the really big, underlying things, and then we rebalance it once a week.

The reason we went down that path is because we think the industry changes over time. As the industry changes and evolves, as long as we’re just looking back at recent history, we will change and evolve with it. If we build a model today and it turns out that everybody loves crypto in three years, in theory, we now then wouldn’t have to go in three years and say, oh, well, we thought the world was this and this was our basic way of approaching it and now we’re going to add something to it.

So the basic idea of saying we’re going to build a simple trend following model is a very, very, very static approach. At a point in time, you say, this is what we think is most representative, this is the right window length, these are the right instruments. We’re going to implement that the same way and do our rebalancing once a month, etc. So half of Corey’s portfolio does that, and half of it does what we do.

There is another ETF out there run by a very good firm called Mount Lucas which is 100% the latter approach. So all of them can work. Our view was basically that when you build your own product, like if I look at the things that we run internally, depending upon how you specify the parameters, you can go through big disparities in performance relative to what everybody else is doing over time.

So if people decide in this world that they’re shortening their window lengths, they’re shortening things, etc., I think our approach is going to be better at adapting to that than if we had decided five or six years ago… For instance, if we back in 2015 had said we’re just going to use a 200-day model or something, 2015, 2016, 2017, ’18, you wouldn’t be talking to us because our underperformance relative to the index would have been very, very large.

But in recent years, we would have been heroes because that’s one of the best window lengths that’s worked. So it’s trying to balance between coming up with something that is stable that you don’t have to change versus something that is dynamic and adapts over time. When people ask me about it in the US ETF space, I say they both have their merits. You can’t say that one is definitely going to work.

Mount Lucas has been working much better than us in 2022. This year, because some of the constraints and decisions that they’ve made have been really helpful, if we had been doing this and they’d been doing it back in 2016, 2017, ’18, we would have looked really good relative to them. So none of these things is a perfect solution, but they’re yet another tool that we can offer to investors so intelligent investors can make their own decision as to how much do I want to allocate in this particular way.

[00:33:03] Niels

This is very interesting to me and I’m just really trying to think out loud here because I think that clearly, your part of the industry is growing. There are more choices today. One of the reasons why part of your marketing pitch would have been, in the past, this thing about that you should pick us because then you don’t have to pick a manager because one manager can be great one year but it could be underperforming next year.

But the more of these replicators come out, you could say you kind of end up in the same situation, because as you alluded to before, there’s going to be periods where one replicator is doing better than the other. So you end up in the same situation that you don’t know if you’re picking the right one. That actually wasn’t my question. This is just something I thought of when you said that.

But the other thing that I guess has happened is that because of your success,for me, it’s not just the fact that it’s a replicator, it’s actually also the wrapping. The ETF wrapping, as far as I can understand as a non-US person, makes things a lot easier for US investors. I think that makes total sense as you have heard me say many times, Andrew, although I disagree on many things in terms of replication versus the real thing.

[00:34:29] Andrew

And yet you still invite me back.

[00:34:31] Niels

I invite you back and loving it, of course. I do think that you are doing a great service to people who are not able to invest in the big managers and so on and so forth at great fees. But what’s happened with your success is that you’ve also stirred and woken the lion a little bit because now we’re seeing the entrance of “the real thing,” the managers coming into the ETF space saying, hang on, you don’t need to have a watered-down replicator in the ETF space. You can now have,for some, okay, it’s not the full diversified portfolio. but for others, our friends like Jerry, it is. So I’m just curious how you see this landscape if we stay within the wrapper now, just the ETF landscape and the opportunities in that.

In thinking about this vis-à-vis the low-cost airlines, when they came on they were certainly competing on price. It didn’t necessarily mean that everyone got lifted, right? Sometimes when you go on a flight, you feel it wasn’t quite as good as it used to be. How do you see the competition that is coming along and how would that change your space, your playground?

[00:35:57] Andrew

Sure. You start off by saying that there’s going to be dispersion in replication products, and I completely agree. Going back to that 20-year history or 18-year, 19-year history on this point of replication, there have been people, really, really smart people who have done really dumb things on the replication side. You can screw it up by getting cute and you can screw it up with getting more complex. We just happen to have not screwed it up because if we can do it with 10 positions, we’re not going to do it with 11.

When I tell people about what we do, I say the measure of success is that we started doing this in July 2016 and we haven’t changed a thing. We’ve outperformed 90% of the constituents of the SocGen CTA Index net of fees on a risk-adjusted basis since then. You want to have a conversation with us in 10 years. As I say, we still didn’t change a thing.

I think that actually, interestingly, lines up with the core ethos of some people who are believers in long-term trend following, for instance, that if your job becomes deciding that this month, I’m going to do 50 days and then I’m going to dial it up to 150 days, it’s a very, very different value proposition as you and I have talked about. It’s a belief that there’s a distortion in the markets and that there’s an opportunity to deliver truly valuable diversification benefits to a strategy.

We’re confident in it because it’s stable and it’s worked over time. We don’t have to keep reinventing what we’re doing. The problem with what happened with the alternative risk premia space was that people would come out and they’d say, we backtested it for 70 years and it’s got a Sharpe ratio of 1.2. And then a year later, it’s been terrible. They’re like, never mind, we’ve backtested a new one. It’s got a new 70-year track record and it’s got a Sharpe ratio of 1.2.

There’s a paradox in it. How can you tell me that it worked for 70 years and then it stopped working in year 71 and then you tell me that you found a new one? That’s the collective insanity of a lot of academic finance is that you say something’s worked for 70 years, and therefore, it’s going to work for 70 years, then three years later, you’re coming up with a new thing because that one didn’t work.

So on the ETF side, I am extremely enthusiastic that Man AHL is in the space, although I think they’re in the space. I don’t know them. I know people on other sides of the business, not this side of the business. I think they’re stepping in with one foot because they’re not sure what’s going to happen in this space. I think that they’ve created an ETF that is a bit of a wild animal. It’s a 15-vol trend following ETF. Out of the gate it was a rocket ship on the way up. It has come back down from them, and I think they’re doing it because they don’t want to compete (for very good commercial reasons), they don’t want to compete head on with what they’re doing in their flagship mutual fund and certainly don’t want to be competing with their hedge funds. But I think they feel, and maybe they’ve heard me proselytizing about it, that the ETF space can be a $100 billion space. It’s less than $2 billion right now because we’re solving something that’s never been solved in an ETF wrapper, which is to have something that actually brings demonstrable diversification value to the rest of your portfolio.

You made this point about being inversely correlated with stocks and bonds. We run an ETF that’s had negative correlation to stocks and bonds. Before this past month, when we ran the numbers, it was doing 1000 basis points of alpha per annum relative to the S&P 500 because it was making money when you needed it the most and it’s available in an ETF. That’s a paradigm shift.

That’s why the ETF that we run is the largest managed futures ETF in the world. It’s actually the largest alternative ETF in the world. It’s the one thing where you can say, I need it in an ETF and it’s as good or better than those hedge funds that I would invest in if I was in a pension plan.

Now, the reality though, as I’ve learned in my 17 years of doing this, if my job was working at one of those pension funds picking managers, I’d pick Man AHL because it’s the obvious choice for me. If I’m in a wealth management firm where I have a revenue sharing arrangement with Man or another hedge fund firm, I’m probably putting it into the hedge fund firm. This is a business with a lot of different principal agent issues in terms of how allocators react.

So I think what’s going to happen is that there’s going to be this growing recognition that managed futures is one of the few things you can make work well in an ETF and you’ll have a lot of new entrants that will come into it where they’re going to be stepping in but try to make sure they don’t cannibalize the good stuff that they have going on but want to have it, and that will lead to more education about it.

Man HL has a phenomenal video that they’ve put out talking about trend following and the value of trend following and it’s for general audiences. That will help with the whole education process, because right now, we’re somewhere between one and two basis points of the entire ETF world. It’s crazy.

[00:41:32] Niels

So let’s assume that you’re right, that there will be great success in this space. You’ve kind of disrupted, you could say, our industry a little bit. I wouldn’t say you were the first because there were other low-fee products out there beforehand. But getting more attention and raising more assets to the space.

Obviously, other products that had low fees have completely imploded in terms of AUM, so it’s not like I think the overall AUM has been growing, it’s just been moving around. But anyways, with more people coming in, perhaps more money will. Overall, the pie will grow. Do you think the industry will continue to push price? Meaning, how cheap can it get? How cheap should it get? It has already been commoditized, to some extent. So how low will you go, Andrew, so to speak?

[00:42:35] Andrew

Well, the ETFs we manage is 85 basis points.

[00:42:40] Niels

Sorry to interrupt you there because there’s one question I’ve been dying to ask you for a couple of years. I forget every time, but you may know this. I see these numbers being listed as you list 85 basis points for that, and others 95, whatever. But underneath the hood, there are other things such as, and correct me if I’m wrong here, this is purely from memory.

There is like an, can I call it an offshore entity that’s sitting somewhere in SPV or something like that. I know from our experience that these are not cheap to run. It’s not like they’re free to run. When people say it’s 85 basis points, is that just the headline number? Does it really cover all the costs of all the small, nitty gritty stuff that goes in to make it work?

[00:43:35] Andrew

It’s 100% of everything. Look, I like ETFs for that reason. They call it a unitary fee structure. If we had additional costs that we were flowing through, we would have to show it. There are ETFs that have what are called acquired fund expenses. Going back to the fee question, managed futures is not going to 5 basis points like ETFs, like long-only ETFs.

There are two things to note about that. The first is the real disruptors in managed futures, in the mutual fund space, were AQR and AlphaSimplex. Around 2010, they both launched (these are great hedge fund firms) mutual funds by themselves. I think AQR originally offered it at 121 basis points but you had to meet some big minimum to get into it or something. But basically, that was probably a third of the average managed futures mutual fund at the time.

People ask, with 85 basis points, when are you going to 5 basis points? It’s an absurd question. The thing you have to understand about how strange the asset management industry is (and this is going to be a little bit of a wonky discussion about competitive dynamics in industries), in free market theory, when an industry evolves, more and more of the spoils of the industry go to the consumers, not the producers. Because as it becomes more commoditized, more and more people compete on price and they have fewer features to differentiate.

You mentioned airlines. The extreme is the airline industry where more than 100% of the benefits of that have gone to customers over time because of this weird thing. They’ve got these gigantic things they have to fill up in huge fixed costs. Pharmaceutical business, when academics look at it, they say 30% of the value (we think about this as a crazy high margin business) stays with producers, 70% goes to consumers.

Asset Management is bizarre because if you start with the assumption, with the data that basically, on average, active management has destroyed value in equities and bonds over 70 years, then more than every dollar of revenue that’s been generated has gone to the producers, not to the consumers. What made Vanguard so disruptive is that into this historically extraordinarily profitable business enters somebody who says we’re essentially going to function as a nonprofit. The more people who buy our products, the cheaper we’ll make the next one.

So there is no other industry like that. You have Vanguard, basically leading the charge. Every dollar they grow, they cut everybody else’s fees, right. Now it’s like the consumers actually own Vanguard because it’s a mutual company. Then you have Blackrock who jumps into it, and they want to compete for market share, so they do this race to the bottom. So there’s this bifurcation in the industry between the really simple stuff that is effectively going to zero.

S&P 500 ETFs, the easy corporate bond ETFs, all that stuff is going to zero. But now the next wave is active things like JP Morgan’s active ETF products, buffered ETFs, all these other things, there’s no price pressure on those because they’re adding a different kind of value and you don’t have a Vanguard doing it.

If Vanguard turned their attention to managed futures and bought DBMF and put $20 billion into it and dropped the expense ratio to 6 basis points, then the industry would have a problem. We’re trying to profit maximize as much as anybody else. It’s just a slightly different pay-off profile.

[00:47:40] Niels

If they did that, Andrew, do you think you might have to go from 10 to 11 markets in your replicator. Just to get a bit of liquidity, right? Okay. Interesting. It’s going to be fascinating to follow this. I think it’s way too early to declare a winner, but I definitely see the challenges on both sides.

Of course, from my perspective, I think it always comes down to net performance. Renaissance Technologies didn’t become successful from having the lowest fee structure, let’s put it that way. So people will have to judge at the end of the day.

[00:48:19] Andrew

Can I add one point?

[00:48:22] Niels

Of course.

[00:48:22] Andrew

The great underestimated risk for a typical allocator to managed futures is single manager risk. Because we all agree that there’s dispersion. We don’t know who’s going to be the winner next month. So if you want the space as an allocator, by definition you should invest in more than one fund. You don’t invest in emerging markets and pick one stock or one country.

Just to give you some statistics, the six largest managed futures funds, mutual funds, five years ago had about $12.6 billion in AUM, of which $7.6 billion was AQR. You add on AlphaSimplex which was the number two player, between the two of them, they are 85%. Two funds are 85% of the six largest mutual funds. Since then, the entire space, those six guys, have gone from 12.6 only to 14.9. SocGen CTA Index has gone up 38% over that period of time and AUMs have only grown 18%.

So net of performance, money has left those top six managers, but the composition of it is what’s fascinating. Abbey has gone from $750 million to $2.6 billion. PIMCO has gone from $500 million to $3.4 billion at the end of October. I don’t know where they were at the end of November. Man AHL has gone from $900 million to $3.2 billion. AlphaSimplex went from 2.2 down to 1.4, up to 3.6, back down to another 2.5 today. And then a LoCorr fund has gone from $560 million to $1.7 billion, while AQR has gone from $7.6 billion to 1.5.

The reason I highlight that is it shows that if you’re thinking of the people that we think of as the obvious answers today, the two plus billion-dollar funds who dominate this industry, were not the obvious choices five years ago. They feel like obvious choices today, but every one of these guys had a much better than expected March of 2020, had a much better than the index 2020.

So what happens is in this space, broadly, the money flows into the guy who did well recently and then it’s subject to the risk that performance reverts to the mean. Most of those guys, with the exception of AQR ironically, who lost all those assets, are underperforming the SocGen CTA Index this year. So the reason I say this is because it just highlights this is the struggle. This is much more than about fees of this fund or that fund.

How do you get diversification so that you don’t have to be re-underwriting the space every year or two? If there’s one thing that we add is that we’re trying to help people to get diversified exposure but do it synthetically so it’s efficient.

[00:51:31] Niels

I get that. It’s a great pitch for replicators to say, yeah, you don’t need to worry about single manager risk. I understand that. I get that. Just from reacting to that, I would say the numbers you mentioned, it’s interesting. I don’t know, always, just my own experience in the last 30-plus years doing this, I don’t know, always that performance is what drives asset flows, interestingly enough. I don’t think that necessarily always the best managers have the most assets and vice versa. So I’m not entirely sure.

Let me give you an example. One of the trend followers that has been around for a long time (and I’m sure there are more of them) had massive changes, massive drops in AUM in the period 2000 to 2007, ’08. Why? Mainly because of the composition of their clients, not because of their performance. But a lot of these managers who’ve been around for a long, long time, they were exposed to wire houses, that was the source of their assets, and wirehouses, their products were not very good, they were way too expensive, blah, blah, blah.

So it wasn’t really because the managers did poorly. There were other things that changed the AUM. I’m not saying this is the case in your example. I’m just saying that, to me, it’s not as simple as just saying you have a great manager and he’s going to attract all the assets, but next year, he might be bad.

[00:53:10] Andrew

I think there was a post on Mulvaney the other day. The guy should have all the assets in the industry. Whether he is making a decision not to take in a zillion dollars of assets because he wants it to remain small or nimble. The asset management industry is built to sell things that are doing well. My point is that it’s not an accident that you have…

[00:53:44] Niels

I agree with that.

[00:53:44] Andrew

There are funds with large armies of marketing distribution that didn’t grow because they didn’t have good numbers. But what happens is when you are running an army of distributors, and you have a fund that’s done well, it’s like five-year-olds playing soccer. All of your salespeople are going to chase it because that’s how they can get made, that’s how they can make money.

But from an allocator side, the thing you have to understand is they get bombarded with people who are trying to pitch them on funds. Nobody is pitching them on funds that are not doing well. If you’re part of a big fund complex and you’ve got two funds that are doing well and two that are doing terribly, no one’s hearing about the two that are doing terribly unless they’re already invested in calling to complain about it.

So this industry is built to push products in that window of time when you’ve had some period of outperformance, then you go out and you push it, you say it’s skill, it’s not luck, and you say it’s something that we’ve discovered, some magic formula that nobody else has. So it’s that combination.

When you layer on top of it, in terms of the incentives, allocators often pick the fund that makes them look the best in front of their investment committee; that gives them the most comfort that they can’t get fired if something goes along with it. Sometimes there are economic sharing arrangements that influence how people make decisions. So there are a million different things going into it.

All I’m saying is that in this space, when you think about the challenges that people have faced, at least from the people that I talk to, when people would breathe a sigh of relief when they would hear about our ETF, it’s because they had bought somebody that they were convinced was unbeatable in 2018. Two years later, it turned out not to be true. They were doing the process again, and then they’re doing the process again, and it was just this exhausting, repetitive process.

My point is that’s just not an effective way to have this as a 10-year allocation because by that time, you probably didn’t have it in 2022 or even 2021 when it would have been great.

[00:55:50] Niels

I guess the same could be said about your side of the industry, meaning replicators wouldn’t have done great either because the index didn’t do well. Everybody was tired of hearing about a CTA at the end of 2019 or ’20. So there wasn’t a lot of interest. If you look at your growth in your AUM, it came, as far as I recall, during the year of the strong performance, not before the strong performance.

I guess you also, not you specifically, but the replicators are also like, we are, to some extent when we attract clients through platforms. Whether it’s a UCITS platform or whether it’s this, you’re always beholden to someone else because you’re not allowed to market it directly to certain investors and so on and so forth.

I do think you touch on a real issue because you’re absolutely right that it’s not always necessarily the best product or the best strategy that is being promoted because it’s driven by other incentives. I think that’s a big issue.

[00:57:06] Andrew

I think I’ve tried harder than anybody I know to understand the buyer base. I know in five minutes if somebody’s going to like what we do. The point that you’re raising, and we have a lot of internal debates on this. You and I have talked about this and I’ve talked about it with Alan as well, we know that there are people who are not going to like what we do for whatever reasons. That often has to do with what their job title is, what they have told their investors about their value proposition is, what their relationship is with their clients, what kind of clients they have, all these other things. So I think people view us as this competitive threat.

I’m not walking into an institution and saying we think we’re better than Man AHL. Man AHL is incredible. They have been doing this forever. They have more resources, more teams, it is totally rational, and they have great products. Rather, we’re basically saying, let’s try to understand that $7 trillion of capital has never spent three minutes trying to understand this space because they’ve never had a way of getting access to it.

Let me be the one to try to explain to them not the configuration of our model and what’s better than anything else, but what the experience is of having something that’s up north of 20% in a year when both stocks and bonds are down, and then also to coach them through what’s going to be experienced in a month like November when everything else in your portfolio was up and we’re down.

How do you, running your business, manage that? How do you coach your clients that they should expect this to be in your portfolio today and in 20 years or 10 years? That’s the education part of it that I think this business has been lacking. When you talk about the fact that the industry hasn’t really grown, a lot of the people who own managed futures mutual funds today, they are the same guys who owned it five years ago.

You don’t have to convince those guys to include a portion of managed futures. The battle becomes which one you should include. Should you pick Abbey and rely on their diversification or do you think PIMCO is going to have another great year like they had in ’20 or ’21? There is such heterogeneity of the investor base that I think the challenge is to try to really take the time to try to understand how they think and what is it in the strategy that would make their lives better.

Increasing a Sharpe ratio from 0.4 to 0.43 over 20 years does not matter to 99.9% of allocators. It’s the experience of owning this thing and having it at the right time and not getting dragged into endless debates when it struggles like it’s going to do.

[01:00:06] Niels

Speaking about struggles, before we wrap up, the 60/40 portfolio struggled last year as we’ve alluded to. This year, not so much. Was last year just a fluke, Andrew?

[01:00:19] Andrew

I think it’s a general rule, whenever I post anything on Twitter, you should trade against it. I wrote something called “The Great 60/40 Head Fake” toward the end of October. First of all, I don’t think it’s a fluke. I think the most likely outcome is stock and bond correlations are going to remain positive over the next decade. How do I get there?

One is they are usually positive. It has only been in a few particularly weird periods, particularly when interest rates have been rock bottom, that the correlation tends to go negative. Now, I would caution that by saying I have no confidence that anybody has a clue of what the world is going to look like in a year. We talked about AI. We all may be slaves to some master AI machine in a year for all I know.

We could have World War III on our hands. So I think the range of outcomes is really wide. We could be back to deflation and cutting interest rates in two years. It’s been that crazy. But I think the base case scenario now is in interest rates, the structural things that kept inflation very, very low, most of them have gone away. The world has changed. We’re going to have inflation. It may not be 2, it may not be 7, but something that’s going to be a little bit higher. In general, that usually means stocks and bond correlations are going to be positive.

The implication of that is a little bit subtle though, because the point of diversification is you’re not supposed to be thrilled at any moment in time. There are always things in your portfolio that you’re supposed to love, and you’re always supposed to hate the fact that you had too much in things that aren’t working at the same time.

So what happened is that in the 2010s (by the way, it’s on our website if you want to see it, the great 60/40 head fake) you can timestamp it as to the moment that 60/40 took off again. But basically, three things happened in the 2010s. One is the returns on both stocks and bonds were great, relatively speaking. Two, the volatility on both was incredibly low. And three, you had an inverse correlation.

So if you just said, I’m going to do the simplest 60/40 portfolio in the 2010s, your Sharpe ratio was north of 1 for most of it. You outperformed 98.7% of hedge funds over the decade. But what happened (and this is where I always get interested in the collateral implications of it) is it was its own bubble. In that, by the end of the decade, people were pitching (it looked so easy) robo advisors. They were saying we’re going to give you five ETFs and that’s going to serve you for the next 20 years. The wealth management business grew up around this idea of as long as you’ve got some stocks and bonds, you’re basically going to be hedged. The diversifiers that people picked were not really diversifiers. If you’re diversifying from equities into private equity, you’re going a little bit in one direction. If you’re going from credit, from bonds to private credit, you’re going a little bit.

But basically, over the past 20 years, your diversifiers are either correlated to bonds or either correlated to stocks. When they weren’t moving in tandem, you felt like everything was working. The problem is, everything goes up and down. So in November, everything goes up and people celebrate and do massive victory laps. But remember, in October, November, everything went down.

So if that world continues, it causes a rethinking at the advisor, at the allocator level, as to, hey, my job is to give people a smooth ride. I’m not supposed to have everything go up or down. So I need things that actually have no correlation to either stocks or bonds. If you invest in ETFs, if you invest in mutual funds, I can’t think of a better strategy that has a lower correlation to stocks or bonds than managed futures that actually works in those vehicles.

So I’m going to keep waving this flag in that, yes, it worked in November, but it’s a structural problem that people have to figure out and deal with. If I’m right that five years from now, most portfolios that have no managed futures exposure today will start dipping their toes in the managed futures pond, it’ll be because you’ve heard this constant drumbeat of how the core tenet of diversification and wealth management in the industry is no longer working, so what else can we do.

That plus good products like in the ETF space is what would cause managed futures broadly to go mainstream in the same way the private credit, private Equity, even junk bonds and other things have gone over time. That’s my bet. We’ll see. I’ll die with that sword in my hand.

[01:05:07] Niels

Yes. I hope you’re right. Although the thought of it becoming mainstream is a little bit scary. I kind of like it to be not mainstream.

[01:05:22] Andrew

There is always this question about, if everybody’s doing it, does it go away? When I started in the hedge fund industry, I went to work for this great hedge fund manager. He had 600 million and it was huge. It was one of the top 10 largest hedge funds and I left several years later. It was 1.8 billion and he thought it was too big. Roll forward 10 or 15 years and he’s got 30 billion. Clearly, size is often the enemy of performance in a strategy.

My argument on managed futures though is that we’re not trading against each other. We’re not fighting to see who gets into a short position in the 10-year first. There’s a lot like ZeroHedge and others that have this sort of nonsense about a $30 billion flip in S&P positions is somehow going to cause some major moves in the markets. The markets are much too big for that.

Instead, what we’re doing is we’re trading against the entire asset management world, the entire wealth management world, the entire institutional consulting world, which has built portfolios that by design are not nimble. As we talked about short-term versus long-term, sometimes it’s great to be nimble. Sometimes it’s great not to have to retract reports where you confidently claimed interest rates were going to stay at 1% for the next decade.

So the absence of memory of this strategy plus nimbleness means you can get knocked around in a year like this, but every now and then, you’re going to have a year like 2020 where you deliver a decade of alpha. How do you get this into people’s portfolios and coach them on how to have it so they have it in 2022, and they have it in 2025, or ’27, or whatever the next year is, and you structured away so that you try to be able to make enough money for them between now and then that they remain invested.

[01:07:16] Niels

I think we found one other little small area where I may disagree with you, because, as much as I would like to think that there could be a lot of money managing the industry overall, I think that’s probably true, a lot more. But I do think on a single-manager basis, every time a manager stops producing the returns they have in the past, to me, it just seems like well, just look at the AUM.

There’s this weird balancing act between still, in my opinion, single manager AUM and returns. Of course, some of it we know will come from slippage and market impact and so on and so forth.

[01:08:04] Andrew

When I started in the commodity business back in the early 2000s, you could make 50% a year with a small amount of capital, and you go 10x the capital. At that point, the market opportunity was significant enough that you would sell like 10%, 15%, 20%. There’s no question that increasing size and greater AUMs kills.

When I was at 600 million, I could focus on trades where I would find something that was 10% or 20% of what it was worth. It would take me six months to do it. I’d put $3 million to work and it was still worthwhile. You can’t do that when you’re at $1 billion or $1.8 billion. So part of our design from a replication perspective is that we think that the risk of crowding goes up (as I saw in the commodity space) the farther you go from the biggest, the deepest, the most liquid instruments.

I’m not worried about crowding in the 10-year treasury, the 2-year treasury, etc. I would be more worried about crowding in heating oil. I think what you’re going to see when more world-class firms launch ETF-based products, the big difference is you have to disclose your positions every day. They love front-running other people more than anything else in the commodity business.

Having seen that in the 2000s, I think somebody at Deutsche Bank told me their most profitable area was the guys who were front-running their own index. So people are going to do this. The ETFs that come to market are going to be very sensitive to that because a big player in this space is not going to want somebody saying, hey, this looks a lot like their mutual fund and their hedge fund and that has $9 billion in it.

They seem to love heating oil and it looks like they’re 37% of trading volume in that market. So I think it’ll come in with a somewhat different flavor. But to me, what 2022 showed was that when the waves are big, it plays out across lots of different markets at the same time. You can make money being short the 10-year treasury or being short 32 different rates futures contracts. So I don’t know. I think all these things, it’ll evolve.

When I think about this basic idea that people have told their clients that even when the world changes, they’re going to take their time and they’re going to watch it until it’s completely and utterly obvious that the world has changed before they make any meaningful shifts in what they’re doing, that’s a golden opportunity if you’re nimble.

[01:10:48] Niels

I’m not worried about that issue either, but that’s for the reason that even with all the evidence we have today, there’s still a lot of challenges for people to embrace this strategy as of course they should.

[01:11:05] Andrew

That’s a point we agree on.

[01:11:07] Niels

Yeah, exactly. That’s a point we do agree on.

[01:11:12] Andrew

Even if we want to grow at different rates.

[01:11:15] Niels

Exactly. Let’s finish on a high note here, Andrew. Anyways, fun, as usual, insightful, as usual. I really appreciate you bringing along these topics. They are definitely worthwhile talking about. I have a feeling that, when we come to our big grand year-end with all eight co-hosts, and myself, on one podcast coming up in the last couple of weeks of the year, I have a feeling replication might be one of the topics we’re going to touch on and see what comes of it. But maybe we’ll find other ways to talk about it and dissect it.

[01:11:50] Andrew

I’ll wear my crash helmet.

[01:11:53] Niels

Yeah. We were talking about, before we pressed record, that it could be fun if we swapped roles, that I had to defend replication, you had to defend single manager, but we’ll find something fun to do.

As a little teaser, if you have some interesting topics that you think would be fun for all of us to debate, and of course, it’s going to be a little bit of a challenge with all nine of us in one call or on one recording, but we’ll do our best.

But if there’s something that really stands out in the suggestions we get, I will be sure to bring it up with my wonderful co-hosts as we record it in about 10, 12 days’ time. Andrew, I wish you well. I wish you a happy weekend and a good start to the month of Christmas, I guess.

[01:12:45] Andrew

Thank you. Let’s hope for a nice big reversal. Let’s go back to what we were doing a couple of months ago.

[01:12:52] Niels

Well, depending on your model speed, Andrew. Be careful what you wish for.

[01:12:58] Andrew

I know what I’m wishing for right now.

[01:12:59] Niels

Okay, fair enough. Anyways, if you like these conversations, we could always use a few extra reviews and ratings and shares. So please head over to toptradersunplugged.com where you can find instructions on how to do that.

Next week, I am joined by Rich. That’s going to be fun. I’ll be recording that very remotely, so to speak, on the other side of the Atlantic. I hope all goes well. No doubt it’s going to be another master class in maybe some more hardcore trend following topics. So make sure you also send in your questions for Rich to info@toptradersunplugged.com.

From Andrew and me, thanks ever so much for listening. We look forward to being back with you next week and, in the meantime, take care of yourself and take care of each other.

[01:13:49] Ending

Thanks for listening to the Systematic Investor podcast series. If you enjoyed this series, go on over to iTunes and leave an honest rating and review and be sure to listen to all the other episodes from Top Traders Unplugged. If you have questions about systematic investing, send us an email with the word “question” in the subject line to info@toptradersunplugged.com, and we’ll try to get it on the show.

Remember, all the discussion that we have about investment performance is about the past and past performance does not guarantee or even infer anything about future performance. Also understand that there’s a significant risk of financial loss with all investment strategies and you need to request and understand the specific risks from the investment manager about their products before you make investment decisions.

Thanks for spending some of your valuable time with us and we’ll see you on the next episode of the Systematic Investor.