Commodity Volatility, Global Macro, and Trend Following with Alan Dunne from Archive Capital
Mar 17, 2022
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Alan Dunne, CEO of Archive Capital, discusses commodity volatility, macro trading evolution, and crisis periods' impact on trend managers. He also plays 'Where Would You Invest?' Grab a green beer and join the pot of gold chat!
Strategic positioning during crises impacts portfolio performance in commodity markets.
Trade-offs between risk management and returns shape trend following strategies.
Diversification in managed futures is crucial due to performance dispersion among managers.
In-depth due diligence enhances understanding of managed futures landscape for investors.
Effectiveness of managers in delivering returns varies with performance attribution and adaptability.
Deep dives
Resurgence in Commodity Markets
Commodity markets have experienced significant volatility, reminiscent of once-in-a-generation price moves. The recent craziness in these markets, particularly driven by events such as the conflict in Ukraine, underscores the cyclical nature of market dynamics. Notably, the conversation delved into how strategic positioning in response to crises or conflicts can impact portfolio performance.
Trend Following Strategies
Trend following strategies have faced challenges and fluctuations in performance over time, with considerations such as market speed, volatility management, and adjustments in response to evolving market conditions. The discussion highlighted contrasting perspectives on managing trend following approaches, including the trade-offs between risk management strategies and maximizing potential returns amid market shifts.
Diversification in Managed Futures
Diversifying within the managed futures space emerges as a critical strategy due to the substantial performance dispersion among managers and strategies. Multi-manager approaches aim to navigate the complexities of selecting managers based on their unique methodologies, market exposures, and performance parameters, acknowledging the dynamic nature of returns within the sector.
Meeting Managers and Due Diligence
Engaging in due diligence processes with numerous managers, attending various industry events, and conducting regular interactions contribute to an in-depth understanding of the managed futures landscape. The experience of analyzing a wide range of managers offers valuable insights into strategies, methodologies, and market behaviors, enhancing expertise in allocating investments.
Manager Perspectives on Performance
Managers' viewpoints on performance attribution and market dynamics play a pivotal role in shaping investment decisions within managed futures. Evaluating historical performance, risk management strategies, and responsiveness to market shifts aids in gauging a manager's adaptability and effectiveness in delivering returns across different market environments.
Effective Managerial Practices for Allocators
Effective managerial practices for allocators involve showcasing competence, being realistic in return and volatility expectations, maintaining consistency and engagement, and reassessing managers based on performance patterns and deviations from expectations. Allocators must carefully analyze managers' performance over various market conditions and be open to reevaluating their allocations if the manager's performance strays significantly from anticipated patterns.
Navigating Emerging Manager Investments
Investing in emerging managers necessitates ensuring a consistent track record and evaluating their skill sets over an extended period, rather than focusing solely on recent performance. It is crucial to scrutinize managers' strategies, understand their historical performance in different market environments, and consider real asset allocation as a means of diversification to manage market uncertainties. For investors with varying levels of capital, allocation to macro futures strategies should be strategically aligned based on the overall portfolio size to ensure meaningful impact.
Establishing Archive Capital in the Financial Space
The establishment of Archive Capital reflects a strategic approach towards macro futures, real assets, and trading strategies, particularly in periods of heightened market volatility and financial uncertainty. Archive Capital offers assistance in manager selection, portfolio construction, and investment insights tailored for smaller asset managers seeking exposure to diverse strategies. The firm's focus on navigating liquid alternatives, private placements, and managed accounts underscores a commitment to offering a comprehensive range of investment opportunities to clients.
Leveraging Futures for Diversification
Leveraging futures for diversification within a portfolio showcases the potential for implementing risk management strategies and enhancing asset class exposure. The utilization of futures for equity beta and the integration of alternative strategies with liquid assets underscore the importance of comprehensive portfolio management. Allocating a significant portion to macro futures strategies enables investors to enhance portfolio diversification and navigate market complexities effectively, aligning allocations with risk appetite and long-term investment goals.
Happy St. Patrick’s Day! The luck of the Irish is on our side as we celebrate today's episode with Dubliner Alan Dunne, CEO and Founder of Archive Capital, a boutique multi-asset and investment research firm focused on global macro and managed futures strategies. Alan has worked in the financial markets and investment management industry for over 25 years at hedge funds and large investment banks as a CIO, hedge fund allocator, macro strategist, and technical analyst.
During our exciting chat with Alan, we focus on the crazy volatility in commodity markets, how macro traders have evolved over the years, and why crisis periods can be good for a trend managers' track record. Plus, Alan plays "Where Would You Invest 10K, 100K, and 100 MM?" So, grab a green beer, keep calm, and shamrock on because we're jumping right into the pot of gold this week!
Chapters:
00:00-01:16= Intro
01:17-17:29= Crazy Volatility spikes & Approaching Trend Following
Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer
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