TTU138: Need for Speed in Trendfollowing ft. Matt Dorsten, Portfolio Manager at PIMCO
Top Traders Unplugged
Is Fast Trend Following a Good Strategy?
There was a sense that fast trend degraded somewhat over the years. Alan, where do you want to go next? Just want to pick up on a couple of points on trading speed again. What allows you to be still effective at it? Is it really good execution or is that degradation?"
Today, we are joined by Matt Dorsten, Portfolio Manager within the Quantitative Strategies group at PIMCO, for a conversation how they manage 60 billion dollars through different quant strategies, of which app. $5bn is in Trend Following. We discuss their process of constructing portfolios using a defensive approach and how they manage to simultaneously maintain a high Sharpe, keep a balance between long and short trades and how they use tail "hedging" in their design of the strategy. We also discuss why they believe having a broad universe of markets is key and why they see a big potential in exotic markets, why they believe it is better to trade faster as a trend follower when markets are liquid enough, their process of measuring the expected returns and much more.
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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE
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Episode Timestamps:
02:28 - Introduction to PIMCO
05:11 - Their investment philosophy
11:11 - Too concerned about the Sharpe?
14:53 - A different Speed of trend following
18:13 - Building a defence against equity drawdowns
22:32 - Balancing the opposing forces
25:45 - A different approach to volatility correlation?
27:06 - Using machine learning
28:04 - The role of bonds
31:34 - The larger portfolio perspective
33:07 - Their research process
36:53 - Number of markets
39:01 - Their view on CTA replication
42:10 - Need for speed?
44:28 - Different models for different markets?
45:50 - Hitting the gas?
48:02 - Cap the equities?
49:14 - Adding non-priced based signals
50:31 - How many strategies do you actually need?
51:17 - What is second best Tail Hedge?
52:15 - Framing the expected outcomes
54:04 - Their sense on liquidity
55:38 - Trend following disagreements
57:05 - Expectations for 2023
59:49 - Running trend following in a bond shop
01:01:29 - Thanks for listening
Copyright © 2024 – CMC AG – All Rights Reserved
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