Jerry Parker of Chesapeake Capital is not soft spoken regarding marketing of trend following vs “managed futures,” a name he says holds back the asset class.
Mr. Parker considers “managed futures” a name devised by FCMs who charged excessive fees during the early days in managed futures history development. “Our track record was contaminated (in the early years) from all those fees they charged. People on Wall Street thought the world revolved around them.”
“Calling the industry trend following wasn’t in their best interests,” he said. “It was (the name) managed futures which that was in their best interests. To a large degree this naming of the investment missed the boat; it kept the industry mysteriousness; very complex. It was as if the industry was saying ‘were so smart you can’t understand what we do.”
The mystery surrounding how performance was generated held back the investment, Mr. Parker contends. “It’s important have a product and service that people can understand they know what they’re getting. There is a benefit in client knowing what to expect.”
Mr. Parker recently launched the Equinox / Chesapeake managed futures mutual fund, and he looks back on opportunities missed. “We should have promoted the name “trend following” and not ‘managed futures.’ If we were trend following centered we would’ve had a diversified program stock program.” Chesapeake trades single stock futures utilizing a program based on the beta performance driver of price persistence. “In retrospect, we should have created a program with training wheels on it primarily centered on stocks so the client could understand what we did at a basic level.”
Correction Notice: In the recent Opalesque Futures Strategies publication we ran a quote from Mr. Parker that said CTAs are becoming accustomed to taking small losses (a risk management strategy that runs against the grain of long term trend followers). The accurate quote from Mr. Parker was CTAs are growing accustomed to taking small gains. The correct quote is:
“It’s become popular in the industry to take small losses profits on a trade,” he said. “That’s the wrong approach.” Mr. Parker noted the difficulty, “the hard work,” is in remaining in a volatile but profitable trade.
DISCLOSURE: These are the opinions of the author and may not have considered all risk factors. Nothing on this web site should be construed as an individual recommendation, talk to your independent advisor. The author and Opalesque may have relationships with those people they cover in the publication. Mr. Melin provides a full disclosure of his business relationships to regulators and certain eligible participants who engage him in consulting projects. Managed futures investing involves risk and there are no guarantees of safety or future performance being implied. Managed futures can be a risky investment. This web site and its content is subject to the terms of the web site. Risk Disclosure and terms of web site are available here: http://www.uncorrelatedinvestments.com/templates/Disclaimer.html Performance information received on this site is provided by third parties and deemed reliable but there is no guarantee relative to same. Performance reporting sources and quality assurance techniques may include, but are not limited to: disclosure document, CTA self reporting, brokerage firm reporting, consultant reporting, spot checking other reporting databases; nonetheless no guarantee of accuracy or implication performance verification or auditing is being made by the publishers. The CTA Database is a project separately managed from www.uncorrelatedinvestments.com.