We Study Billionaires - The Investor’s Podcast Network TIP333: Trend Following w/ Niels Kaastrup-Larsen
Jan 24, 2021
Niels Kaastrup-Larsen, a seasoned hedge fund veteran and founder of Dunn Capital, dives into the world of trend-following investment strategies. He discusses the resilience of these strategies amid the unique volatility of 2020, showcasing their adaptability in unexpected market conditions. Niels highlights the importance of diversification, automated trading systems, and how trend following remains effective even in a low-interest-rate environment. He also introduces innovative risk assessment metrics, providing a fresh perspective on managing portfolio risk.
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Dunn Capital in 2020
- In 2020, Dunn Capital's trend-following models reacted quickly to the market crash, reducing long equity exposure by 87% in days.
- This swift action, along with shorting oil, generated strong returns in March.
Algorithms and Learning
- Trend-following algorithms don't inherently "learn."
- New data influences parameter selection within specific lookback periods, impacting model behavior.
Central Bank Intervention and Trend Following
- Trend-following strategies would have likely performed well without central bank intervention.
- Their typical positioning (short stocks, long bonds) aligned with a continued downturn.