Top Traders Unplugged TTU137: A new approach to Entering Trends ft. David Gorton, CIO at DG Partners
Path to Trend Following
- David Gorton, coming from a prop trading background, was curious about CTA performance.
- He started exploring trend following in 2006, leading to a standalone business in 2008.
Market Dynamics
- Market behavior is characterized by movement between unstable equilibriums.
- These movements are influenced by market news and macroeconomic factors, sometimes allowing for free movement and adjustment.
Impact of Financial Repression
- During the "dark age" of financial repression, volatility was suppressed, hindering trend following.
- This period highlighted the need to adapt trend following models to changing market regimes.
Today, we are joined by David Gorton, CIO at DG Partners, for a conversation on how they use trend following to achieve a multi-billion dollar portfolio. We discuss how to become a better trend follower by understanding the weaknesses of the strategy and their approach to produce positive alpha, the challenge of timing trend following and how they focus on the conceptual trend without giving up the skew and how the "dark" 10-year period has affected their approach to volatility. We also discuss how they manage risk in an uncertain environment and the state of liquidity, whether trend following has a limit in terms of capacity and much more.
DG Partners LLP is authorised and regulated by the FCA and only provides services to professional clients as defined under the FCA rules.
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Learn more about DG Partners.
Episode Timestamps:
02:08 - Introduction to DG Partners
03:38 - Their road to trend following
12:13 - The weaknesses of trend following
16:00 - Too concerned about Sharpe?
19:10 - The dual mandate
22:51 - The trend following narrative
27:19 - Capturing the meat of trend following
30:24 - Need for speed?
38:13 - How many markets do they trade?
40:16 - Rethinking volatility?
43:01 - Their execution process
44:00 - Their view on CTA replication
47:39 - Risk management
51:36 - The state of liquidity
59:36 - The absence of pain
01:00:40 - Trend following in a broader portfolio
01:02:58 - Capacity in trend following
01:05:26 - Trend following disagreements
01:06:50 - Expectations for 2023
01:08:17 - Thanks for listening
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