In this first episode of the new mini series with the largest and most successful trend followers in the world, we are joined by Russell Korgaonkar, CIO at Man AHL, for a conversation on how Man AHL uses trend following in their trading strategy. We discuss the philosophy behind their work and why they believe trend following is a great strategy, as well as what makes Man AHL stand out to investors and how they make trend following more digestible while maintaining "crisis alpha". We also discuss Korgaonkar’s view on CTA replication and their process of improving their trend following system and models, why having a good execution system is important for enabling different sources of alpha and why they use dynamic position sizing to maximize their returns, how they overcome periods of drawdowns and how you price your work as a CTA, how much you should allocate to trend and much more.
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Episode Timestamps:
00:00 - Intro
02:22 - Introduction to Man AHL
03:45 - Their trading strategy
06:18 - Why does trend following work?
10:11 - A unique type of trend following?
15:46 - A trade-off in the objectives
19:14 - The effect of adding carry
21:13 - Picking from the strategy menu?
22:46 - Too much focus on Sharpe?
24:33 - Replication - yay or nay?
29:54 - Have the models become outdated?
35:55 - The importance of execution
39:06 - Dynamic vs static position sizing
44:24 - Overcoming drawdowns
48:42 - Discussion on capacity and fees
52:18 - How to think about expected returns
57:09 - Can you trend follow trend following?
58:50 - Managing the cash
01:00:21 - Disagreements in trend following
01:02:03 - Questions to ask as an allocator
01:03:49 - Expectations for 2023
01:05:51 - Thanks for listening
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