Trend Following Research

Quote from marketsurfer:

What an incredible fall from grace. The investors must have fled "enmasse" to drop AUM at such an amazing rate. Wonder what triggered the precipitous decline? Did he have just one giant investor ( institutional or perhaps a sovereign entity) or 1000's of little fish?

Surf
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Merrill Lynch pulled 600 million in one shot from JWH at the bottom of their performance. I believe it was in 2007. At the time I think it was something like 33% of their AUM. In the end Merrill looked like fools as JWH performance has gone straight up. They sold the bottom. I think JWH was up over 100% in 2008.

The crazy thing was even after a monster year in 2008, investors continued to pull money from JWH. I think in general FOF guys and investors lost all appetite for risk after 2008.

People who continue to stay with TF's will always be happy as their strategies have been very successful over time. Sure one can cherry pick drawdowns (which you Surf are an expert in), but in the long run these guys are the best.
 
Quote from marketsurfer:

Or was it a massive streak of bad luck resulting in horrid performance? Anyone care to venture what % peak to trough decline this was? It must be one of the steepest plummets of all time. Imagine being an investor at the start of the decline and being locked in for a year plus.....brutal!
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Surf, you always outline the worst possible scenario for people who invest with TF's. Let's chang e the scenario and talk about the people who invested in JWH in Jan of 2008 and made over 100% on their capital?

Or lets talk about both groups of investors who lost EVERYTHING when one trick pony Vic Neiderhoffer got destroyed selling puts.....TWICE !!!
 
Quote from EPrado:

Surf, you always outline the worst possible scenario for people who invest with TF's. Let's chang e the scenario and talk about the people who invested in JWH in Jan of 2008 and made over 100% on their capital?

Or lets talk about both groups of investors who lost EVERYTHING when one trick pony Vic Neiderhoffer got destroyed selling puts.....TWICE !!!
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Here is one to chew on: Dave Druz. He is in one of my new books. 360 months of performance data to review:

http://www.tacticalnet.com/index.php
 
Quote from EPrado:

People who continue to stay with TFs
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That would be fine... if the TFs took money only from <i>high net worth individuals</i> who are unconstrained by mandates, fiduciary responsibilities and cover-my-back / career-risk type of thinking. But that isn't the money they predominantly take. They take money from institutions who won't invest till they see a stellar run of recent performance, and who pull money when they suffer a 20- 30% drawdown... That's how the world works. A TF can't take hot money because he's a fee-pig, then turn around and complain when that money leaves after a drawdown... Pick one business model or the other -- smaller, sticky investors, or bigger, hot-money investors.
 
Quote from EPrado:

The crazy thing was even after a monster year in 2008, investors continued to pull money from JWH.
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Because many other funds discontinued redemption and put up 12 months liquidity gates. That turns the few funds that still honor redemption requests into ATMs.

Trend following funds were among the few fund classes that continued to honor redemption requests, mainly because they mostly deal in highly liquid (futures) instruments only. FOFs e.g. redeemed capital of the trend funds to meet their own FOF level redemption requests.
 
Quote from Rodney King:

But that isn't the money they predominantly take. They take money from institutions who won't invest till they see a stellar run of recent performance, and who pull money when they suffer a 20- 30% drawdown...
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What makes you say that TF funds mainly get their funds from institutions? I don't work in the industry, never have and likely never will, but from what I have read asset allocators are concerned with protecting themselves should a fund that they have invested in put in a poor performance. Therefore, the AA's generally stick to funds managed by people with a certain pedigree (e.g. worked at one of a handful of financial institutions for a number of years, has a degree from one of the perceived elite universities, etc). In so doing, they have a degree of protection should one of the funds that they allocated funds to perform poorly. The AA can always point out that he/she allocated funds to a conservative manager with all the "right credentials".

I understood that a TF investor such as Parker, Dunn, or Abraham had difficulty attracting funds from institutions. Am I correct?

Regarding withdrawals, as a fund manager you are only as good as your previous year's performance in the view of far too many investors.
 
Quote from Butterball:

Because many other funds discontinued redemption and put up 12 months liquidity gates. That turns the few funds that still honor redemption requests into ATMs.

Trend following funds were among the few fund classes that continued to honor redemption requests, mainly because they mostly deal in highly liquid (futures) instruments only. FOFs e.g. redeemed capital of the trend funds to meet their own FOF level redemption requests.
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Yes...that was definitely the case. Plus there were a number of funds that got clobbered in 2008. So people who had money in both the funds that got clobbered, and the TF"S who cleaned up probably wanted to take the money from the good side to cover losses from the bad side.
 
Quote from marketsurfer:

Finally some fresh trend follower info. This guy has a unique angle, do you know his AUM?
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The Tactical Institutional Commodity Program has $77.5 AUM. I haven't been able to find the AUM for the Tactical Commodity Trading Program.
 
Quote from fjpenney:

What makes you say that TF funds mainly get their funds from institutions? I don't work in the industry, never have and likely never will, but from what I have read asset allocators
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I meant institutional money in the broad sense, either placed directly or via intermediaries such as allocators, consultants, platforms, FoFs.
 
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