Top Traders Unplugged TTU135: Moving Beyond Pure Price Trends ft. Yao Hua Ooi, Principal at AQR Capital Management
Cyclicality of Risk Premia
- Risk premia strategies like trend following exhibit cycles of performance and drawdowns.
- These cycles are influenced by factors such as the frequency of large market movements and macroeconomic volatility.
Balancing Sharpe Ratio and Dual Mandate
- Investors often desire a strategy that delivers high absolute returns and crisis alpha (dual mandate).
- Balancing the Sharpe ratio with the dual mandate is important.
Redemptions and Regret
- AQR faced redemptions during the lean trend following decade (2009-2018).
- Many clients regretted not holding on when trend following performed well in 2022.
Today, we are joined by Yao Hua Ooi, Principal at AQR Capital Management, for a conversation on how they use systematic tools like trend following, to take advantage of inefficiencies in markets. We discuss the pros and cons of risk premia strategies and how they manage to improve the Sharpe ratio while making sure the "dual" mandate is fulfilled, how they have moved beyond pure price trends as part of the evolution of their trend programs. We also discuss the process of building a trend following strategy and why they prefer to build models rather than mimic a strategy through linear regression, their approach to adding alternative markets to their portfolio, why they are always concerned about capacity and much more.
-----
50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE
-----
Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.
IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.
And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.
Learn more about the Trend Barometer here.
Send your questions to info@toptradersunplugged.com
And please share this episode with a like-minded friend and leave an honest Rating & Review on iTunes or Spotify so more people can discover the podcast.
Follow Alan on Twitter.
Learn more about AQR Capital Management.
Episode Timestamps:
02:50 - Introduction to AQR
04:12 - Their investment philosophy
08:47 - Risk premia strategies
11:55 - A historical perspective
13:55 - Too focused on Sharpe?
22:24 - Changing the narrative
30:41 - Being unconventional
35:13 - Getting comfortable with the data
39:22 - The future for economical trend following
42:55 - Their research process
47:05 - The managed futures space
48:39 - Pricing trend following
55:00 - The need for daily liquidity
57:32 - The portfolio construction process
01:00:12 - The pros and cons of replication
01:04:25 - Applying risk management
01:05:40 - Adding new markets
01:09:19 - The role of trend following
01:13:08 - Reaching the limit
01:16:05 - Trend following disagreements
01:17:52 - Expectations for 2023
01:19:47 - Thanks for listening
Copyright © 2024 – CMC AG – All Rights Reserved
----
PLUS: Whenever you're ready... here are 3 ways I can help you in your investment Journey:
1. eBooks that cover key topics that you need to know about
In my eBooks, I put together some key discoveries and things I have learnt during the more than 3 decades I have worked in the Trend Following industry, which I hope you will find useful. Click Here
2. Daily Trend Barometer and Market Score
One of the things I’m really proud of, is the fact that I have managed to published the Trend Barometer and Market Score each day for more than a decade...as these tools are really good at describing the environment for trend following managers as well as giving insights into the general positioning of a trend following strategy! Click Here
3. Other Resources that can help you
And if you are hungry for more useful resources from the trend following world...check out some precious resources that I have found over the years to be really valuable. Click Here