Graham Capital’s Tactical Trend Fund gained 27% through August Systematic funds follow trends in the market, picking up on signals sent by price action — either up or down — that their models and trading algorithms sniff out. In theory, systematic funds remove the emotionality and biases of human judgment by rigorously adhering to the rules set by their models. One systematic fund has outperformed its rivals by readmitting the human element.
Graham Capital’s Tactical Trend Fund has gained 27% through the end of August, according to a tabulation from Societe Generale. That compares to peers in commodity-fund rankings that are up 10% over the same time frame, and those in the systematic diversified category have gained just over 3%, according to data from HFR, which tracks hedge-fund performance. Explaining the success of his fund’s strategies this year, Tom Feng, the chief investment officer of the quant strategies product, acknowledged some of that success was a direct result of some fund-manager intervention.
In an interview with MarketWatch, Feng explained that Graham Capital introduced a profit-taking and stop-loss concept into their decision-making process, rather than slavishly applying what the market suggested. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates.
I can unsubscribe at any time. This slight adjustment, suggested by Ken Tropin, chairman of the firm which he founded in 1994, had a positive contribution in a few asset classes. Feng told how, “metals had a strong upward movement around the end of January while energy markets shot up in March.
We had long positions in both cases and the models actively reduced exposures to lock in more profits through subsequent choppy market environments.” Trend-following funds thrived in 2022, when both stocks and bonds struggled as the Federal Reserve hiked interest rates to quash rapid inflation. In sustained periods of dislocation, that ability to participate in both rising and falling markets can provide a source of diversification precisely when a traditional portfolio may need it most.” In addition, Graham added a couple of new component signals into their model. Two picked up tactical trends, while another fundamental indicator went into their more diversified quant macro strategy.
A carry signal, one that follows interest-rate differentials between different currencies, has also had a positive impact, Feng notes. Graham Capital manages around $23 billion in total assets, split roughly evenly between systematic and discretionary strategies. The outperforming Tactical Trend fund that was launched in 2006, accounts for $4 billion of the total.
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