Trend Following Risk Premium…is it there & could it go away? ft. Rob Carver

[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 Rob Carver and I, Niels Kaastrup-Laren, where each week, we take the pulse of the global markets through the lens of a rules-based investor. Rob, wonderful to be back with you this week. Hope you had a good start to the new year. How are things in the UK?

[00:00:41] Rob

The UK is cold, which I guess is probably a good thing actually given that last year was the hottest ever on record. So any hint that temperatures aren’t going to skyrocket is probably a good thing. That’s good. A lot of political uncertainty at the moment. We don’t know whether we’re going to have our election in May or perhaps at the same time as the US election, which can make things interesting.

So the political situation is very uncertain, very variable at the moment. But yeah, I don’t feel like the year started with any big news so far. It’s just early days and I guess people are still dragging themselves back to their desks and deciding what positions they should have on. From the market’s perspective, it’s still fairly quiet.

[00:01:24] Niels

Yeah, I agree with that. Although you and I have some big news to talk about later in the show that just came out yesterday, I guess. But overall, I completely agree with your sentiment. Just before we dive into our topics and actually quite a lot of questions, which we appreciate, so thanks very much for sending those in.

I try to ask you, besides the topics we’re going to be talking about, besides the initial how are you doing, I do like to hear about what’s been on your radar. If there’s anything that since we last spoke, which was in mid-December when we did the group recording, if just there’s anything that you picked up on your radar thinking, well, this could be interesting, I should keep an eye on that in the next few months or maybe 2024 as a whole.

[00:02:22] Rob

One thing I don’t like doing, actually, is talking about short periods of time. For example, I’m not going to tell you my year-to-date performance because I think it’s a bit silly. I can count on one hand the number of trading days there’s been since the beginning of the year where markets have been open, so that does seem a bit silly.

Having said that though, there is some early indications that where there is action in the market, it’s generally in commodities. I do have this little table I put up and it tells me which markets have been most active and based on, as I said, a very small sample. Gas markets, they’ve been going up quite a bit recently.

I don’t know whether that’s normal seasonal behavior or whether that is actually interesting potentially, because I guess everyone feels like last year, we successfully came through this period of high inflation, and the central banks were amazing, and they’ve done a brilliant job in soft landing, and now we’re going to have a really gentle decrease in interest rates and a return to the Goldilocks economy that we all know and love.

That’s one story that that may turn out that way. But the list of things that can go wrong with that scenario are extraordinary. I actually made a discretionary call on interest rates peaking, when I was about three or four days off last year. I normally do about one good discretionary call every decade. In the last 10 years, I’ve done two. So my CV for a job as a discretionary macro trader I’m sure is going to be approved any day now.

Obviously, interest rates have come down a fair bit. Not the actual Fed Funds rate, but the 5 and 10 and 20-year rates have come down, particularly actually, interestingly, in the UK. But there are so many things that can go wrong with that and the obvious one, of course, is a return of inflationary pressures as well as the macro risk around war and stuff like that.

Although I prefaced my remarks, at the beginning of the conversation, with, “You know, well, not much has happened yet,” the potential for stuff to happen is really there. One thing that people have noted is if you look at the level of the VIX, it’s really low. Given that there is so much uncertainty out there, it’s really not reflected in the markets, the volatility at least.

Whether that’s because of asymmetric pressures of people selling vol through structured products or these one-day options, that’s mainly conjecture. If you believe that the VIX is a fair price of volatility, at the moment, it looks really, really cheap. It doesn’t match the headlines because the headlines scream, oh, my God, there’s two big wars going on at the moment effectively and all these inflationary pressures could return. Who knows what’s going to happen?

[00:05:14] Niels

As I listen to you saying that, a few things come to mind. One is of course that we always think the volatility will come show up in the equity space. Well, maybe that’s not how the future looks. Maybe the volatility level, it’s in other areas. By the way, last year, volatility was significantly higher than normal in, say, fixed income, for example. There could be other asset classes. So that’s just one thing I thought of.

The other thing you mentioned, you mentioned you made a discretionary call. I’m just curious, when you do that, is that in your trend portfolio or do you do that just completely separately, say, okay, I’m just going to buy some bonds? And then I’m also curious to know, what was the other discretionary call that you did well?

[00:]05:58 Rob

My trend portfolio, my futures portfolio is completely automated, completely systematic. I’d like to keep it that way. So I think it would be a big mistake (I don’t do it very often) because it kind of pollutes the backtest of the strategy if you like. So I like to keep that doing its own thing. This is in a long-only risk parity style portfolio that I have with my long-only investments which are mainly composed of ETFs and a few individual UK stocks.

Basically, what I have in there is a handle I can pull which changes the equity-bond allocation from something like a long-term average of maybe like 90/10, 85/15, something like that. What I did in October was pull that handle and actually load up on bonds more than equities. I did so deliberately also at the longer end of the curve because I wanted to get the benefits of the additional duration there.

Not because I felt that the curve would flatten, which is the other obvious reason for going further out on the curve. It was purely to get the duration risk because this is a non-leveraged portfolio, and I don’t believe in leveraged ETFs. So, a very pure way of expressing my opinion would have been just to have bought US 10-year Treasury futures or US 5-year Treasury futures, or both of those things in 20 years, as well.

I didn’t have a view about the shape of the curve, I had a view that the curve was going to come down. Because I’m doing this behind my portfolio where I don’t have access to leverage, well, the biggest bang for buck was to go for the highest duration, highest vol instruments which were the longer-dated, the the 20, 30 years, which also had the advantage of having a higher carry as well, a higher coupon rate if you like.

So there’s a lot more bang for my buck there. That’s why I expressed that opinion in that particular way. The other time was COVID. In March 2020, I actually unwound my risk earlier than my normal long-only process would have done. And then I tweeted on, I think it was March the 23rd or something like that, I can’t’ remember exactly what it was, but it was about one or two days away from the bottom in equity markets.

I said, all right, this is the bottom, and I started winding that risk back up again. I started buying back into equities. So that’s what I did. I don’t do it very often, and also, it doesn’t have a big effect. I’m not going from zero to 100 and back again. If I go back to COVID, I calculated that what I did effectively increased my portfolio performance in that year by 2%, which is better than nothing. It’s not bad.

[00:08:36] Niels

On a $10 billion portfolio, Rob, that makes a difference.

[00:08:41] Rob

Yeah. Unfortunately, I’m not quite running $10 billion anymore. It used to be, but not anymore. Importantly, it’s only part of my portfolio. It’s very occasionally. It’s when I have a really strong feeling. I’m not trying to call market cycles the whole time, it really is in, literally, in very unusual situations.

I guess there’s a bias towards me doing it in the fixed income markets because I kind of feel that’s where, I’m not saying I have an edge necessarily, but I do follow them more and understand them more than other markets I trade. I’m doing it in a size that’s not really going to make much difference either way, to be honest. So 2% here, 2% there every few years, you could argue it’s not worth it.

[00:09:28] Niels

It’s the sport.

[00:09:29] Rob

It’s the sport. Exactly.

[00:]09:31 Niels

It’s the sport in it.

[00:09:32] Rob

This tedious business of automated trend following, good grief, how boring is it? The computer does all the work. Some people go to Vegas, I make discretionary macro calls every few years. Everyone has their own fun, right?

[00:09:47] Niels

It’s funny, as you were describing the two calls, I was reminded of those are exactly the same calls that Bill Ackman seems to have made in the last three years. So I wonder if he gets the same call from Powell as you do. But there we are. Let’s leave that aside.

[00:10:00] Rob

That’s an extremely small number of things I have in common with Bill Ackman I have to say, particularly given his recent…

[00:10:06] Niels

Oh, yeah, well, let’s not go there.

[00:10:08] Rob

Let’s really not go there or they’ll start checking our dissertations for plagiarism or something probably.

[00:10:13] Niels

Okay. Well, let’s move on to something more familiar, which is, you mentioned that trend following has been fairly quiet this year so far. I agree with that. My trend barometer is weak around 32. The performance I guess, which we’ll find out in a second, reflects and ties in with that. But I will say one thing that is interesting when you look at, at least, the attributions that I have access to.

There has been a couple of interesting moves. One is that you’re doing really well if you’re long Japanese equities, and you’re doing really well if you’re short Hang Seng. So a little bit of action there, not necessarily in the same direction. But other than that here are the numbers so far this year, this month: down 29 basis points as of Wednesday for the BTOP 50. SocGen CTA is down 72 basis points, Trend down 59 basis points, and the Short-Term Traders Index is down 66 basis points.

I think yesterday probably they all made a bit of money, so it looks a little bit better. MSCI World up about 0.25% so far this year, World Government Bonds down 0.75%, and the S&P is up about 0.25% as well.

Let’s jump into some of these questions. I’m going to start with the first one, which may also be the longest one for me to read. We’ll see. It is from a good friend of the show, Nobert, and he writes, “I have a challenging question. What is the long-term expectation for the trend following premium as measured by the SocGen Trend Index after costs and its stability or sustainability i.e. what is the risk it could die out completely as many of the other factors, like value or small-cap, and due to what reason? Some background. In a video cast, Eric Crittenden,” who has been a guest on our show, “estimates the risk of the trend following premium ever dying out in the distant future at 5% to 10%. This could happen if the vertical integration of large hedgers, who have so far mainly paid the trend following premium, become so large across the market that they can hedge most fluctuations internally. In the early days of trend following managed futures funds until 1990s, their risk-adjusted excess return, over the money market return, would have been only slightly higher than the corresponding equity return. This trend following excess return would have, therefore, only fallen slightly to date because it could now be exploited more easily across the board. In the most likely scenario, Eric expects this return to approach the expected equity risk premium of around 5% per annum and remain stable there in the long run.”

All right, well, I thought of no better than you Rob to answer this easy question from Nobert.

[00:13:13] Rob

It’s a trivial question. I don’t even think it’s worthy of an answer. It’s just so easy to answer. Very simple as well.

Obviously, I’m joking.

It’s a great question and very thoughtful. I’m not sure I necessarily agree with some of the premises in the question. For example, I don’t personally believe that if you take to the value factor, that that has been wiped out.

I just think that value is a very cyclical thing, and there are periods, sometimes long periods, when it doesn’t seem to work very well and then it does come back or appears to come back. That’s just people’s preferences changing over time, essentially, risk preferences for that kind of risk. If people really dislike the value factor, then there’ll be a few years when value does really badly.

Inevitably, stocks of the value will be so cheap that people will start to sniff around and buy into them, and then value will become attractive again. That also is often driven around market cycles as well. Classically, in the tech bubble of 1999 to 2000, value did very badly, going into that, because everyone loved tech stocks which were growth stocks. Coming out of that, value did extremely well because the bubble was driven by tech stocks.

A lot of the returns, outsized returns, particularly in the US over the last few years have been driven by tech stocks. Well, in fact, just seven, the so-called Magnificent Seven stocks. That has, again, made value look as is if it’s done very badly. There have been blips around things like when COVID vaccines came in and stuff like that they made it look better, but you could argue that perhaps value is due for a comeback.

I’d hesitate to say when that would happen or how long it would take or anything like that, but I believe it’s cyclical. So I think it’s hard to write it off. Trend on momentum is a bit different. There is some cyclicality there as well, but I think it is fair, if you empirically at the returns of trend over time (I’m now looking at the last 50 years), my data set goes back to slightly before that. It’s about 1970. Other people have gone much further back.

Winton, for example, did his work looking at several hundred years of prices, and they’re seeing the momentum premium, over time, as being much more stable. But if I look at since 1970, there is definitely a decline in trend. Trend does very well in the 1970s, not quite as well in the 1980s and that goes forward. In the last 20 years, it seems to have roughly stabilized.

Now, whether that’s a thing that’s happening, so whether there’s a genuine thing going on there, I have not heard the comments made by Eric about vertical integration. But if that, for example, is happening, I don’t know. If it’s a cyclical thing, in other words, if it’ll come back and be stronger again in the near future, again, I don’t know.

It could just be random chance because trend, it’s a relatively weak risk premium, by which I mean, it’s not something where you make money every month or every year or even perhaps every decade. It does come in and out of fashion, but more from a luck perspective than a cyclical perspective. So it could just be bad luck. I don’t know which of those explanations is true.

A lot of this comes down to what you believe drives momentum. Things like risk premium, then it’s working because people don’t like these kinds of risks. People don’t like holding stocks, So there’s an equity risk premium. People don’t like holding long-duration bonds, so there’s a carry premium on bonds. People don’t seem to like holding assets that have exhibited momentum, so there’s a momentum risk premium. That’s my favorite explanation of that.

It’s just that is human behavior. As long as the humans are the main actors, the main decision-makers, at the kinds of frequencies that we’re trading at (so I’m not talking about in HFT where it’s all computers now), as long as humans are the main decision-makers at time periods of between a month, two months, a year, then I believe that those patterns in our brain, if you like, those biases, those things we like, will meet the momentum, will continue to work on and off, all the time, into the future.

[00:17:25] Niels

I’m in your camp in the sense that I do understand the question and I understand that a lot of people like to talk about this idea of a risk premia. I probably even would understand why Eric, without having heard the full explanation, likes to talk about that because they are now in the space where they would probably not talk so much about trend following but more how they do in their combined product, which makes a lot of sense. So narrative is important.

Personally, though, I think it’s a little bit of a moot point. I think that we can do too much to try and fit trend following into the language of other strategies where it may not fit. Personally, I’m not really into this risk premia for trend following. I mean, why does trend following work? Well, it works because markets move, and they move for different reasons at different times.

Whether it’s human behavior (clearly it is part of that), supply and demand if we come to commodities, changes in economic environment when we come about the financials, absolutely. But I’m personally not a big proponent of trying to make this too theoretical and having to define some kind of risk premia for a strategy like ours. But I appreciate your thoughts and your comments. I’m sure Norbert will as well.

[00:18:53] Rob

The other thing to add (sorry, just to interrupt you), is even if you know the risk premium has fallen for trend following, as long as it’s uncorrelated with other risk premia, as long as it’s relatively uncorrelated with the equity risk premia, then it would still make sense for an investor to hold trend following in their portfolio.

[00:19:09] Niels

Yeah. By the way, obviously, the firm I work for, we have actual data experience for 49-plus years. All I can see is that actually, annualized returns in the last 15 years are pretty much the same as for the last 40 years. It hasn’t changed. It varies a little bit, clearly, depending on the timeframe, but it’s not hugely different. Even the industry as a whole had one of its best years on record in 2022. That doesn’t suggest to me that this strategy is going to go away anytime soon. Anyways, let’s leave it at that and jump to a question from Bruno.

Bruno writes, “Happy New Year to you and your guests. And as always, thanks for the quality content you deliver week in and week out.” Well, you’re very welcome, Bruno. “I have a question for Rob on balancing endogenous and exogenous risk management and controls in a system. In a dynamic position sizing system, the bulk of risk and position management is a direct emanation of signals and volatility estimates. This is entirely left to the system and is happening endogenously. However, this might not be sufficient due to certain limitations and models, assumptions, and market data. So it is not uncommon to have overlays and other circuit breakers. These exogenous features alter how the system works, and therefore, can be construed as meddling with the system. Being pragmatic, we have to strike a balance between the two, so I’d love to hear Rob’s golden rules regarding finding this elusive equilibrium. I can see that having overlays on top of endogenous risk management works to control leverage and correlation at a macro level. But would he advocate a hard stop loss and performance thresholds at which the system would be forced to liquidate positions, reduce leverage, correlation, and other key risk parameters? And how can he justify any of these hard stops as not meddling with the system?”

Well, that was a tricky one to get through.

[00:21:26] Rob

It’s fine. It’s quite a nice question for me because this difference in endogenous and exogenous risk management is something I’ve written about before, and I suspect Bruno’s probably read those posts from me. Basically, if you think about the way that systematic strategies of all kinds, not just trend following, are constructed, they nearly all have an element of estimating the risk of positions in them and sizing positions accordingly.

If you like, that is kind of risk management 101 because you’re effectively saying this is how risky I think the world is, this is how much risk I want to take, therefore, this is how confident I am about these positions, therefore, this is the direction I want to go in, therefore, this is a risk I want to take. You’re putting all those things together. So in a sense, these systems do their own risk management.

The fancy way of saying that is that it’s an endogenous risk management. Endogenous just means within the system. Now, the problem with that is that it may do stuff that you don’t like. For example, you may have all of this very good endogenous risk management, but one day you wake up and your system got astonishing leverage. It’s got massive notionally sized positions on.

The reason for that is probably because volatility has fallen a lot, and therefore, the automatic rescaling has increased your position accordingly. Or you might wake up one day and look at your positions and be like, oh, crikey, all these positions are really highly correlated. Because in the current market environment, bonds and stocks are positively correlated, and I’m long bonds and long stocks, therefore, I’m massively exposed to the fact of the risk of them both going down together.

So what you can do is apply, what I call, an exogenous risk management. There are different ways of doing this. One way is just a very manual discretionary way. Actually, in my experience in a lot of mostly systematic funds, shall we say, the risk management decisions often could be discretionary, potentially. You could argue that the risk manager’s job, in a systematic fund, is basically to stop the computer from doing something stupid, and that can only ever be a discretionary decision.

That’s one point of view, and it’s potentially quite valid. It’s to say there’s something going on now, or there’s some conditional, some combination of position such that we’re very uncomfortable with the risk and therefore we want to do something about it. Now, I take a somewhat stricter view and say, well, actually, ideally, I don’t want any human discretionary involvement even in this part of the process.

Although it’s an exogenous risk management and lives outside the core system, I think it should still be a system. It should still have rules set out to say things like, for example, if your leverage is bigger than x then do y. If your correlation matrix is like this, then change your positions accordingly to reflect that. And I have the rules in place that do things like that.

Now, as Bruno points out, the problem with that approach is that the more you do that, the more you distort the system and make it different. Let’s take an analogy that, hopefully, will make some sense.

Imagine that you’re driving around a racetrack in your car. Obviously, you’re adjusting your speed according to the corners and where you are on the track and the weather conditions and things like that. And then your risk manager comes along and says, “You’re driving this car very fast at times, so what I’m going to do is put a speed limiter on your car so you can’t go more than 100 and say 200 kilometers an hour.” Actually, that’s not going to have any effect at all if when you were naturally driving, you were going no more than say 195 kilometers an hour. If you never get to 200, then that speed limiter has no effect. It’s only there on the off chance that something weird happens like maybe you lose control of it, something on the engine and the car suddenly speeds up, then the automatic system will top your speed off.

An analogy might be that, let’s say, in the backtest, you never lose more than say, I don’t know, 25%. The maximum drawdown is 25%. You might put in something saying, I’ve got a 40-year backtest here, it’s very unlikely that I’ll lose more than (to be a bit pessimistic), say 30%, 35%. So if I ever get to 35%, I’m going to shut the system down completely or I’m going to reduce my positions in some way. So it’s a limit you never expect to hit. It’s not going to change the expected behavior of a system.

The problem comes when you’re driving around your truck and your risk manager says, well, this 200 kilometers an hour is still very fast. I’m going to limit you to 150. That’s going to mean, in practice, every time you’re going down the street and you put your foot down, you’re going to get to 150 and the car’s not going to go any faster. So it’s going to change, quite a lot, the expected behavior of your system. The more these things bind, the more your system gets affected. There’s no real rule for this. Again, I like to be systematic. I like to have rules that I use.

So what I say is, actually, I’m going to set my system up such that 95% of the time it’s completely unaffected by these additional constraints. That’s like saying 95% of the time, I’m never going to hit that speed limiter as I’m driving around the circuit. Five percent of the time, I’m happy to be in a situation where I’m being slowed down slightly. That’s going to reduce my performance a little bit. But what it’s kind of like doing is a little bit like paying an insurance premium.

In fact, if you’re doing something where you reduce your leverage or shut down your system at a certain level of loss, to get kind of geeky for a minute, what you’re effectively doing is buying a synthetic out-of-the-money put option on your performance. So you’re sort of protecting yourself from your performance going below a certain level.

You’d be doing that synthetically by effectively delta-hedging your portfolio rather than going to a bank or something and saying, here, can I buy this put option on my performance? Because you can only do that if you are…well, Renaissance did it to avoid tax. That’s another story. So yeah, I do like these risk constraints because I’m running my system automatically.

I don’t have the time to make discretionary causal performance, and I feel you shouldn’t do that. It’s something you can systematize. But I don’t believe they should bind very often. For me, the rule of thumb is that 95% of the time my system is running normally, and only very occasionally should it change its behavior because it hits a risk in there.

[00:27:50] Niels

It’s an interesting discussion. Yesterday, I was recording an episode that comes out on Wednesday with Cem and David Dredge. They’re both incredibly insightful when it comes to some of these risks. Clearly, they’re both involved in the vol space. Actually, Dave has written, he writes wonderfully every month on his convex strategies handle on LinkedIn.

He’s written about this race car analogy in a different way, where, basically, he says, well, the car that’s going to win, and therefore the investment strategy if you put it into our world, is the one that has the best brakes. So it allows you to actually go really fast, but you know it has really good brakes. To a large extent, I think trend following actually fits that quite well.

But what he also says, and people should listen to the conversation because I’m not remembering every word of it, but he’s basically saying that too many people are optimizing their portfolios and maybe even our systems, if we look at it as managers, for the mean. We don’t want to get too far away from the mean.

We don’t want to be this outlier, losing a lot one year, and making a lot in the next year. But that’s really what we should do. Certainly, as an overall portfolio manager, you need to also optimize for the these, let’s call them outliers. We call them that, or the dispersion, or divergence is actually what he said.

So it is an interesting thing in the sense that, should we be scared of the occasional time where our systems get a lot of conviction, let’s put it that way, in our positions, or should we welcome it because that is where the big performance might come? So, interesting. Let’s jump to the next question from Oliver.

Oliver writes, “I hope you’re well. Looking very much forward to all upcoming TTU podcasts. Rob made a call for questions regarding his upcoming episode and here we go. What’s your take on trading single stocks instead of stock indices in a diversified multi-asset trend following program? What effect might this have on total fund metrics like returns, volatility, skewness, correlation to stock market beta, etc.? Thanks and keep up the great work.”

Thanks, Oliver.

[00:30:08] Rob

Why is our good friend Jerry writing in under a pseudonym, I have to ask myself. He is a well-known fan of the single stock.

Okay, single stocks. Obviously, one of the interesting things about stocks is if I’m trading crude oil futures, I can’t decompose them anymore. I can’t go into different grades of crude or something like that. But if I’m trading the S&P 500 index, what I’m effectively trading is a basket of 500 stocks, and I have the alternative option of trading those stocks individually.

There are obvious benefits in doing that, potentially. So diversification is a good thing and owning more instruments is better. You could argue that going from one S&P 500 index to 500 stocks, you’re opening yourself up to 500 more opportunities to trade different instruments, and therefore, that should give you additional diversification.

This is especially true if, as we say so often on this show, something like correlation is not necessarily a very good measure of the kind of nonlinear outliers you can get from a strategy like trend following. So, although the S&P 500 stocks are quite well correlated, like maybe a correlation of 0.7, and on paper at least, you’re not going to get a lot of diversification through trading them because of that high correlation compared to trading something like wheat which has got a correlation with S&P zero or negative.

So it’s a good thing to own those individual stocks. That’s an obvious benefit of doing this. To answer the question in terms of returns, vol, skewness, correlation, and so on and so forth, the individual stocks are going to have slightly wilder volatility properties than the index. They’ve got more potential for very high positive or very high negative skewness, for example. They’ve got more potential to do crazy stuff than the index, as a whole, because the index as a whole is obviously built up of things that often hedge each other, so it doesn’t suffer from idiosyncratic risk.

Correlation to stock market beta, well, again, it depends on what you’re doing. If you’ve already got a bog standard set of CTA futures which is going to include the S&P 500, the FTSE, the DAX, the Euro stocks, and so on and so forth, if you then add on to that the individual 500 stocks, then clearly, if you just do that dumb thing, then you’re going to be massively overweight stocks in your portfolio. Which means, of course, that if stocks are going up, then your overall portfolio beta to stocks is going to be much higher. But you’re probably not going to do that.

If you’ve got any sense, what you’re probably going to do is say, well, I started off with a, say, 20% allocation to stocks, which originally I got through exposure to indices. Now I’m going to move to getting that exposure through individual equities and maybe the indices as well, especially in countries perhaps where you can’t or don’t want to trade the individual stocks for whatever reason.

I might increase the allocation to stocks a little bit to reflect the fact that I’ve got this additional diversification, which gives me a bit better expected performance. But you’re not going to go from having a 20% allocation of stocks to having a 90% allocation to stocks. That would be a silly thing to do. You should just keep that weight of stocks the same or a little bit smaller. Those are all the lots and lots of good reasons to do it.

If I was running a multibillion-dollar CTA, and I had 50 or 150 people working for me, I would be trading individual stocks. No arguments there. The reason I don’t personally do them is I’m not running a multibillion-dollar CTA, I don’t have to have 50 or 150 people working for me. Actually, trading stocks, as an additional asset class, you can trade stocks in quite a small-ish chunks. Although, with some of the bigger US stocks you do run up against size effects which make it hard to trade all 500 S&P 500stocks with a retail-sized account, even a reasonable-sized one like I’ve got. You could go down the route of fractional shares but those brokers tend not to smell so nice, shall we say. So there’s a sizing issue for a retail account. But the main reason I don’t personally do it is just the work involved.

There are other things as well like you’ve got to be able to short them. That means you’ve got to borrow them and there are a lot of mechanics around that. The backtest is a lot more complicated. You need to know about borrowing fees and stock availability. You need to know about short constraints. Okay, you can make it long-only and then short with the futures. So there are ways around these things.

But generally speaking, you know, I would say rule of thumb, going from a classic futures CTA to a futures plus stocks CTA, you’re probably roughly tripling the amount of work involved, I would say, as a rule. That’s my gut feeling, back of the envelope, for maybe a 10% to 20% increase in returns. that’s clearly worth it if your fund is big enough, but it’s not for me.

[00:35:33] Niels

I think all your points are very valid, so thank you for sharing. What I would love would be for someone actually to show the difference, because clearly, we know people who have done just to futures and now trade the single stocks. But I would love to see a backtest of that, or even live trading would be great. Because my gut feeling is the following.

I think it sounds, in theory, like a smart thing to do, maybe, disregarding all the operational hassle. But it’s for me, maybe, a little bit like this thing about, well, maybe we should trade 300 markets or 400 markets instead of the 75 most liquid markets. I think that the performance probably is going to be more or less the same. But I think it will be different. Just like if you trade 300 markets or 400 markets, you’re going to have different performance at different times.

I don’t think it’s better in the long run. I haven’t seen any evidence of that. So yeah, I think it’s a good positioning. I think it’s a good narrative. But does it, in actual dollars and cents, make a difference? I would question that. Until I see the evidence of course, then I will change my mind if I’m proven wrong.

[00:36:44] Rob

Very quickly, Niels. Would that be a backtest which, let’s be honest, you could torture to prove anything or would you rely on live track records? So, how long would that need to be?

[00:36:54] Niels

Of course, if people are doing an honest backtest, and they include all the fees and the borrowing costs and all that hassle, of course we can’t take into account that sometimes you’re not even allowed to short stocks when there’s a crisis and you really need to short them. You may not be allowed to do it.

But be that as it may, if there was a proper, well done backtest over the last 10, 20 years where you replace your 20% based on futures with your 20% based on individual equities, I think that’s a good starting point. I only really know of one, namely, Jerry, that has embraced it. But I don’t think he’s embraced it for that long. So it’s probably a bit too early to have actual experience to show the difference.

[00:37:39] Rob

I think Winton have been doing it for, maybe, 10 years.

[00:37:43] Niels

Yeah. But obviously, they’re not going to disclose to me what the difference is between that. Anyways, it will definitely be a topic, I’m sure, for the future as well.

All right, we move on to Critter. Critter writes, “Curious, what would the minimum lookback period be to be considered long-term in the trend following space? Seeing many funds that close their US bond shorts and claim to be medium to long-term. Obviously, there’s no right answer.” So how would you answer that?

[00:38:21] Rob

Obviously, it’s a very subjective question. As far as I know, there’s no official standard in the industry. There’s no SEC rule that says you can’t call yourself long-term unless your holding periods at least x. I would say that one way to think about this is, if you look at the trend following systems that I trade at least, their efficacy tends to worsen with holding periods of significantly less than a month.

So, when you get down to like a week, the signal tends to look really bad even before costs. Obviously, you’ve got costs which are higher on top of that. So, I’d be surprised if your holding period was a week and you were calling yourself long-term. To me, that’s short-term, personally. We can argue about what medium-term is. But then I know of people, some people, I think Rich for example, would say he thinks long-term is over a year.

Again, I think if you look at the efficacy of trend following, it actually starts to deteriorate at that point. So to me, that seems that you’re no longer almost a trend following manager if your average holding period is two years, at least in my opinion. So yeah, for me personally, at least a month. There are probably lots of people who’d say that even that’s too quick to be considered long-term.

[00:39:46] Niels

Yeah, I would say that. From my experience, I would say one month is definitely too quick. But I will say it’s a challenging question, and I’ll explain to Critter why I mean that. That is because there are many things about how you can actually define it. One way would be, say, well, we can define it as holding period. Yes. But most CTAs don’t do it on a trade-by-trade basis anymore. It’s an exposure to a market and therefore it can be made up by lots of smaller sub-signals, so to speak. Therefore, it’s hard to say holding period as a concept. So that’s one thing. Maybe you could measure your average exposure period to a market before you reverse the signal. That would be one way.

The other thing, and maybe that’s more speaking from personal experience, and that is, at least on our side, we can have certain lookbacks, that you can define and you say, well, that’s kind of the term in terms of how long it takes for us to get into a trade. So the entry you can very easily define in terms of your lookback. But actually, getting out can be influenced by many things.

You can obviously have a simple system that uses exactly the same rules to get out. But then you also have, for the most part, people who use stops or other ways of getting out and they can be much more dynamic than just a simple lookback period. That makes it hard to pinpoint, especially when he talks about that some managers have already gotten out of their short bonds.

Sure, but that can be influenced by something that is not related, necessarily, to getting a new buy signal if it’s a reversal system. Anyways, it is obviously a topic that will always be there.

[00:41:33] Rob

Yeah, just very quickly on your first point, Niels. You’re right. It’s hard to define holding periods. So what I do is I look at my turnover and I just say, what’s one divided by that? So if on average, I’m turning over my average position 10 times a year, then I say that means my holding period is about five weeks.

So yeah, it’s not a trade-by-trade thing, because of course, I’m continuously adjusting my exposure. It’s effectively the inverse of my turnover that I define as a holding period.

[00:41:59] Niels

That makes complete sense. All right. Last question and then we move on to some really juicy stuff that you brought along. It’s a question that came in just a little while ago from Chris. Chris writes, “Our firm is an IRA based in Aspen, Colorado.” That sounds wonderful at this time of year. “We use a trend following systematic trading strategy applied to portfolios of index ETFs. Can you share a couple of names of software companies that do robust backtesting of trade strategies. We want to validate our strategy beyond all of the backtesting we’ve done by hand. Thanks very much.”

I don’t know anything about backtesting systems because we do all our own, so to speak. But I know you’ve written about it.

[00:42:42] Rob

I do on my own as well. I don’t really know of anyone, this is going to sound a bit insulting, but anyone serious that doesn’t do their own. I think that there probably are. There are some retail backtesting products, but I’m guessing this person is far too serious to use those. And then obviously, you’ve got the stuff that if you’ve got a reasonable-sized hedge fund, you almost certainly have written your own stuff, almost certainly.

There’s a middle ground, I suppose, where people do use third-party products. I’ve heard every now and then people say you should use x or y or z. My understanding is a lot of them are really aimed at single stocks. In the futures space, I don’t think there’s much out there. I’m always really reluctant to recommend stuff when I’ve never used it myself and I’m not even in the market for using it.

So it’s like saying to me, Rob, what would you recommend as the best- trying to think of a product that I don’t use that isn’t an item of ladies clothing, which will probably get me into trouble. But if said to me, you know, Rob, would you recommend insert name of ladies clothing here, I’m like, well, I don’t have a need for it. I don’t wear it myself. It’s just not my thing. If that’s your thing, brilliant. I can’t recommend it to you.

I might have heard that x, y, or z is a good backtesting software but without personal experience. The bigger question is, should you use somebody else’s or should you write your own? It is a difficult one because writing your own is a massive upfront investment in time. But in the long run, it’s always better to write your own because of the flexibility and control it gives you. It’s not necessarily cheaper.

In fact, unless you are big enough with decent economies of scale, it probably isn’t cheaper. Logically, it can’t be. But most people will find that the moment they want to do something that goes slightly outside of what the software can do, you’re faced with either trying to hack it to get it to work or get the firm that sold it to you to customize it which is a pain, and potentially giving away IP as well, or you end up writing it yourself. So I think that’s why most people end up writing it themselves.

[00:45:04] Niels

Yeah. Obviously, it also depends on how complicated the trend strategy that Chris wants to backtest, how complicated it is, because I do know that some online brokerage platforms, if it’s a simple kind of, I don’t know, moving average type strategy or if it’s a longer-term breakout strategy, you could probably do it via some of those platforms. If it’s an ETF, obviously these ETFs will typically be on the platforms nowadays.

So, yeah, I’m sorry, Chris, we can’t give you a better more specific answer, but I hope you understand why we’re careful recommending anything we don’t know and have personal experience with. That would be silly of us really to do. But we appreciate the question, and we love the fact that you do trend following in your IRA.

All right, Rob. We’re finally here. Crypto ETFs have been approved 10 years after the Winklevoss brothers first proposed a Bitcoin ETF in 2013. But who really won? I know you want to talk about something different. I want to ask you, maybe up front, a completely different question than you might expect, and that is, I thought that the Bitcoin idea was to have something that was decentralized, unregulated, etc.

Now we have ETFs. So now we’re back into the regulated and centralized world of finance. Is it such a great idea do you think for the crypto world?

[00:46:41] Rob

I love this question. I’ve been trying to, actually, formulate a way of saying exactly this on Twitter. But my thoughts are too complex to fit into 140 characters. Although the character limit has been extended, I refuse to. I think writing a 5000-word diatribe on Twitter isn’t the right thing to do, which is another thing that Bill Ackman and I disagree on. Yeah, so you’re right.

The way I see bitcoin is it’s this massive chicken and egg problem. There must be something that Bitcoin is useful for, for it to have value. It’s not something that has an intrinsic value. So, Finance 101, it must be something that produces a stream of cash flows either now or in the future. So it must give you some ownership of something.

You could say, if it really is the future of money, the future of money is anonymous, the future of money is decentralized, the future of money is thousands of servers mining stuff and validating transactions, and that is the future. If you also then think that one specific currency effectively has the monopoly on that, so you don’t believe for example that yes, that’s the future of money but it’s going to be central bank digital currencies, it’s not going to be decentralized. It’s not going to be anonymous, but it is going to be in this blockchain form.

You might say the blockchain itself has some value in it, there are other use cases where blockchain works, that may be true, but you don’t need to own Bitcoin or insert name of your favorite cryptocurrency here, IC or whatever, to do that. So there must be something that it’s good for, something of value. Bitcoin has now been for 14 years, approximately, 15 years, and there’s no evidence that it’s actually being used for the purpose for which you described.

There’s no evidence that lots of people are using it for payments. I would put a finger in the air and say that the number of Bitcoin transactions as a payment for something has got to be less than 1%. Maybe someone has done some serious research on this, but I’ll be astonished because they just aren’t people going around buying stuff with Bitcoin. It’s actually something that’s very hard to do.

It’s actually still very hard to use Bitcoin in its intended purpose. It’s very hard to buy bitcoin in an anonymous decentralized way and store it on a cold wallet which is the way you should do it. What instead has become easier and easier and therefore the thing that Bitcoin is being used for is purely as a speculative asset. So, it’s very easy to trade Bitcoin on an exchange

Various regulators have been trying to make it harder and so on and so forth. Often, those exchanges now have KYC requirements so it’s no longer anonymous. Most people put so-called fiat money and buy their Bitcoin or maybe use Tether or another stable coin as a transition bridge between them. Do their buying and selling of Bitcoin and then sell it when they’ve made a profit.

They don’t think go out and use the Bitcoin to buy stuff. So it’s a pure, pure speculative asset. So the market demand has become, well, we need to make this speculative asset as easy as possible for as many people as possible to trade. That’s why we have exchanges that are increasingly becoming under the purview of the SEC and having to do KYC 100 compliance, why the FCA at the start of this year has said to exchanges you’ve got to actually have risk warnings and tests to make sure people can trade these products. in the UK, it’s quite hard to trade now for example crypto derivatives.

You need to show that you’re a sophisticated customer, under the EU rules that we, ironically, still follow. So, all of this stuff has come in, and now we have the final accomplishment, which is to basically, effectively, synthetically create a proper financial asset that is regulated, tradable on normal exchanges. So, it’s something that, in every possible way, is a normal financial asset, which means that anyone can who can buy or sell ETFs can buy or sell this thing pretty much, if you’re in the US.

Inside it is this other thing, this other weird thing. But let’s put as many layers around it to make it as unlike what it’s originally supposed to be as possible. So, either it is the future of money, in which case it has potential, maybe it has a value. But if so, why? That’s not the direction we’ve been heading in. We’ve gone more on the direction of just being this thing that you buy and sell.

As I said on the podcast before, I’m retained as a research advisor to a crypto hedge fund, and this is my way of repaying them despite my animosity towards crypto. The CEO of that fund, he said if crypto is like anything, it’s like modern art. It has no real intrinsic value for people who seem willing to trade it.

It wouldn’t surprise me if there isn’t already an ETF where you can have a bunch of modern art stuck inside it ,or some cars, or some watches, or some whiskey, or one of these other weird assets that people like to buy and sell that don’t have any tangible value. Well, actually, whiskey, cars do have some tangible value.

If you’re an art lover, you could argue that having a Rothko or Pollock on your wall has some tangible value as well. It doesn’t work for me. But yeah, I don’t know what to say. I’m speechless.

[00:52:44] Niels

Well, I will make you unspeechless, if there’s such a word. And that is because, as much as you can argue that it has no intrinsic value and it’s just pure speculative product, once we get it into an exchange form, once we get into a certain liquid form, once we get it into a form where the transaction costs are reasonable and low and so on and so forth, it actually ends up becoming valuable potentially for investors from a diversification point of view.

I know you recently wrote a blog post about, maybe rebutting a tweet, I’m not entirely sure, of someone who suggests that actually, and it’s almost like trend following, you do some kind of optimization to see what’s the optimal allocation, and it’s like 50% or 60%. Clearly, very few people, unfortunately, will end up having 50% or 60% in trend following. I think the person who wrote about this came with a 84.9% allocation to Bitcoin. So I’m going to let you tell the story from here.

[00:53:59] Rob

Basically, there was a paper in, I think it was a couple of years ago, by three guys who worked at, and they still work at, BlackRock. They used a lot of economic theory and analysis and stuff like that and numbers. They wrote this paper. The paper is, actually, the basic idea behind the paper can be summarized very easily. If you like assets with positive skew, Bitcoin has positive skew. Therefore, you should own lots of Bitcoin.

This 84.9% figure is literally one figure in a 50-page paper that, of course, someone has pulled out of context. So, I’m not going to blame the original authors. But I know, from experience, if you write 50 pages, and you include one thing in there that’s controversial, then that’s what people are going to focus on and going to pull out and say, “Look, these three experts working for BlackRock say you should have 84% of your portfolio in crypto.

If you’ve got less than that, the original guy on Twitter said, if you’ve got less than that, you’re not bullish enough sort of thing. This abuse of economic theory and optimization statistics goes on all the time. But of course, this is crypto land, so the offenses are even more egregious than they are normally.

I wrote a blog post which basically pointed out a number of issues I had with, well, taking one finger out of context, out of a much richer and more interesting paper, obviously, that’s the offense of the people on Twitter and the crypto bulls who will literally use any piece of evidence whatsoever to support their case. I’m very sure that if the SEC hadn’t approved spot ETFs, then the crypto bulls on Twitter would have come up with some reason why that was bullish.

Well, now we haven’t got the cold dead hand of TradFi on our shoulders that we can really go to the moon with this thing. Anyway, that’s another story. There’s the point taken out of context that is not the fault of the original paper. The original paper, the basic idea that you look at the history of a price over returns of some assets, and you do some kind of optimization, and then you say, well, this is the optimal value in your portfolio.

So that process, that three-step process, if you like, there’s nothing wrong with it in theory. The problem is if you misunderstand or abuse what’s going on. I do these kinds of exercises quite a lot as you alluded to, Niels. I did one last year with trend following. I said, well, under this particular configuration I could produce figures of allocations to trend following of 85%, 84.9% very easily.

But what I’m always very careful to do is to say, well, it depends on at least three key assumptions. Assumption number one is that the history of the price, going forward, will be like it was in the past. Assumption number two is that the assumptions you’re making (and in this particular paper it’s very important), the assumptions you’re making about what people’s preferences are or what people like are correct. In this specific case, people’s preference is for skew. And the third assumption is to say, well, whatever comes out of the optimizer, that’s what you should do. That’s an assumption you should never make, because, first of all, it relies on the first two assumptions. Thirdly, anyone who dumbly believes what comes out of an optimizer and wants to use that as their allocation is a bit nuts.

To be fair, the original writers don’t do that. They say these papers are written like, well, this is an interesting experiment. If we put these numbers into this equation, this is the answer we get. Isn’t that interesting? The correct way of interpreting it is to go, that is very interesting actually. The incorrect way is to say, look at this number here. It’s 84.9%, good, let’s go to the moon. That’s not the right way of doing it.

So I’m always very careful, when I do these things, to say here are my results but take it with a pinch of salt because it relies on x, y, and z. So just going into the assumptions made in that paper specifically, one thing they do is they take crypto data back to I think it was January 2010, Bitcoin prices specifically. Now, I’m normally a big fan of using as much data as possible.

I said to you earlier in the discussion that my data set goes back to 1970 and I’d like more data. I’d love to have Winton’s 300 years of cotton prices or whatever they use because the more data, the more statistical significance, the better things are. But there is a significant difference between saying, I think the prices of say, I don’t know, gold in the 1970s, I think there are important lessons that we can learn from how gold traded in the 1970s and apply those today.

Obviously, the world is very different now, but if you’re doing a long backtest that averages over lots of historical periods, then it’s fair enough. But the nature of Bitcoin has changed so much since January 2010. If you want to say, well, what’s the market cap of Bitcoin? For example, these numbers are going to be probably wrong, but I think there were about 10 million bitcoins in existence to the first order of approximation. Let’s say the price is about $30,000 to first order of approximation. So 30,000 times 10 million is what, 3 billion?

[00:59:34] Niels

Sounds right. I know the numbers are not right, but if that was true.

[00:59:38] Rob

Anyway, it’s billions. It’s billions. It may be 300 billion. It’s a big number. Do you know what the market cap of Bitcoin was on January 1st 2010? Have a guess.

[00:59:50] Niels

I have no idea. Very small probably.

[00:59:54] Rob

It was about $150,000. So it was like a penny stock of a penny stock of a penny stock. It was just this tiny, tiny irrelevant thing. So, the first problem I have with this paper is to say we think that the way that Bitcoin traded in 2010, that the average return, the skewness, and the standard deviation, and all these things they measure, is relevant to how its trading now.

I just think that’s absurd. It was like a neighborhood grocery store in terms of market cap, and now it’s got a market cap that’s equivalent to the GDP of a decent-sized country. So that’s the first problem I have. The other problem is to do with the way that they throw out, this preference of skewness. Because Bitcoin is positively skewed, to say if you like positive skewness, you’ll love bitcoin, it’s a self-reinforcing prophecy.

[01:00:57] Niels

It’s a stretch. It’s a bit of a stretch.

[01:01:00] Rob

Exactly. But as I pointed out in this blog post and I wrote about it, I might as well just say, if you like positive skewness, you’ll love lottery tickets because lottery tickets are the most positively skewed asset that exists. You take a small loss 99.99999% of the time, and every now and then you win the jackpot. There are people who like buying lottery tickets.

It tends, unfortunately, to be people with less money, who spend probably a bigger percentage of their income on lottery tickets and other forms of gambling than they should do. So I’m not denying that there are people out there who like positive skew to the extent that they will make decisions about optimization which, to people who don’t like positive skew as much, are incorrect.

Basically, the paper can be summed up as saying something like if you really like positive skew and if you believe that the way that bitcoin has behaved over the last 14 years, including in 2010 when it had the market cap of a grocery store, is likely to repeat itself in the future, then yes, you should put most if not all of your wealth in Bitcoin. But that’s just proving mathematically what is just common sense.

If you have extremely unrealistic expectations of return of a particular asset and you really like the characteristics of that asset, then yeah, put all of your money in there. Although this is a bit of a rant, sorry to listeners, but there is a serious point here which is this idea about preferences of skewness is something I’ve written about before.

It’s actually quite interesting, because going back to trend following, because that’s why we’re here, trend following is a positive skewed asset as well. The work I’ve done before just says things like, if you like positive skewness, then you should have a bit more trend following in your portfolio than someone who doesn’t. Effectively, it’s the same.

It’s effectively, the same maths, if you like, but it’s a significantly less extreme version of it. But I could just as easily say, if you think trend following is going to have a Sharpe of 2 and make 50% a year, then you should put 90% of your portfolio into it. That’s mathematically correct.

But I’m certainly not saying that either of those things are true just because that mathematical equation follows. You won’t see me on Twitter saying I’ve written this and you should put 84.9% of your portfolio in trend following, you aren’t bullish enough. You’ll never see me doing that. Definitely not.

[01:03:42] Niels

Good. All right. That’s reassuring. However, just to set the record straight, the market cap for Bitcoin, at the moment, is 852 billion, and the price is around $43,689.

[01:04:01] Rob

So that’s like the GDP of the Netherlands or something, right? Or Belgium.

[01:04:06] Niels

I have no idea. But I can also tell you that there are 19.6 million bitcoins, and of course, we all know that it is capped at 21 million. The real scary number that came from this page that I found is the fact that there are 94.6 billion supply of Tether.

Anyway, different discussion. Before we end for today, you did want to talk a little bit about something we rarely talk about which is forecasting, or not forecasting, but looking into the future.

You found, I guess, maybe even one of your colleagues, Henry Neville, from Man Solutions, who had written a piece about looking into 2024. He is, of course, very quick to point out in the beginning that it is not a house view because they don’t have a house view. But I was curious when you brought it up in terms of where you want to go with this.

[01:05:03] Rob

At the start of the year or the end of the year, all the investment banks and big portfolio managers often produce this year-end report, looking ahead forecasts. I think the JP Morgan one is like 850 pages and probably took 30 man-years to reduce, so I’m certainly not going to read that. But I thought I’m going to read one of these things, just one. I chose this one A, because of obviously I used to work for Man. I have this obviously little warm feeling when I look at them even though I don’t own shares in them anymore.

Also, secondly, because it’s short. And thirdly, because as you imply, unlike almost all of these other forecasters, it’s quite amusingly written with a massive pinch of we don’t know everything that’s going on, what’s going to happen. So it’s not really as much a forecast as a series of comments about, for example, the last section reads, the headline in last section is, “Some concluding remarks given with much humility and a compliance disclaimer.”

And then it starts, we’ve all been fumbling in the dark, I have been wrong plenty of times. This is not investment advice and do your own research. So I think that’s exactly the kind of approach that you should take if you are going to do this kind of year end stuff. I’ll very quickly read out what Henry is suggesting may or may not happen. Risk parity, 60/40 doesn’t look too exciting. Forward looking expectations aren’t great.

The stock-bond correlation looks like it might be improving. It was going closer to zero again, so that would be good for risk parity. So that’s probably good. Bonds look a little bit better than equities on a risk-adjusted basis. The yen’s cheap. I’m trying to remember if I’ve got a position on. I’m short yen, so that’s bad for me. Thanks, Henry. Hopefully, if yen does move up, I will change my position. I’ll change your position at some point.

Brent futures have got a lot of backwardation, which is interesting. So that supports a long position in those. I have gone short gas, but don’t have any position there. So that’s not helpful either. I mentioned this earlier in the podcast, VIX is really cheap. So he actually quantifies it and says it’s in the 16th percentile of historical readings.

In other words, out of every eight historical periods, it’s only ever been cheaper than this one in eight of those. So that again seems kind of cheap. But as you said Niels, earlier, it might be that the risk we get is in inequities and that’s the reason why. Of course, it’s Man, so alternatives, traditional risk premia compressed.

So you should be looking at alternative risk premia. And although Niels you don’t agree with the theoretical idea that momentum is a risk premia. If you do, then I guess you might be of the opinion that even if the outright performance momentum doesn’t look good, because everything else looks so shockingly expensive, maybe on a relative basis, you should put a bit more money into trend following this year.

So there we go. I’ve finished with a nice little advert for trend following and I expect my check in the post.

[01:08:20] Niels

I’m sure you will get that from some. Yeah, of course, I couldn’t agree more with the fact that trend following should always be part of the portfolio. Not necessarily, I think, that it is something that you should trade around. But you should certainly have a constant high call allocation to the strategy without a doubt.

All right. Well, if anyone out there listening today has enjoyed this conversation, which we hope you did, then please go and leave us a rating and review on the various podcast platforms. They really do help, and we do read all of them as they come in. So we would kindly ask you to help us out on that. Also, of course, share the podcast with a friend or family member or a colleague. That certainly is also highly appreciated.

Next week, I’m joined by Katy. Katy is back for a fun, insightful conversation. So if you have questions for Katy, send them in. Info@toptradersunplugged.com, that’s where we will get them and answer them. In the meantime, Rob and I would just like to say big thanks for listening. We look forward to being back next week.

By the way, do not forget to listen to Cem and Dave as we publish that on Wednesday. It’s a really exceptional conversation. Anyways, in the meantime, until next week, take care of yourself and take care of each other.

[01:09:50] 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.