Today, we are joined by Marty Bergin, President of DUNN Capital Management, for a conversation on how and why they have continued to focus on Trend Following as their core investment strategy. We discuss the challenges of improving upon trend following and if it's possible to deliver it with a high Sharpe Ratio, what differentiates DUNN Capital from other trend followers and how they use research to stay well prepared. We also dig into their approach to trading futures and determining trends and where they see the weaknesses of trend following strategies, why they choose to look at the overall portfolio when managing the risk and why they think portfolio replication can be problematic. We also discuss how they manage risk and why they prefer to reside in the medium to long term when it comes to trend following, how they approach capacity and fees and why they choose to trade using a human touch rather than automated execution, what returns are achievable from trend following and much more.
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Episode Timestamps:
02:31 - Introduction to DUNN Capital Management
05:02 - Why Trend Following?
07:35 - What differentiates DUNN Capital Management?
12:06 - Hitting the right balance
14:34 - Reflecting on the performance in 2022
18:43 - The speed of systems
22:28 - Their research process
25:36 - Trading futures and determining trends
28:08 - Weaknesses of trend following
29:12 - From individual markets to portfolios
31:23 - What is the right number of markets?
34:24 - The risk of CTA replication
35:57 - Dynamic vs. static position sizing
39:38 - Primary focus when managing risk
41:29 - What is the right lookback period?
43:10 - Their approach to capacity and fees
47:15 - Is the HQ Location an issue?
48:53 - Monitoring trades
53:09 - The role of trend in larger portfolios
59:02 - The cash management process
01:03:44 - Questions to ask a manager as an allocator
01:05:55 - Expectations for 2023
01:07:46 - Thanks for listening
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