Simplicity In Trend Following Andreas Clenow Top Traders Unplugged

TITLE: Simplicity in Trend Following | Andreas Clenow CHANNEL: Top Traders Unplugged DATE: 2018-12-17 ---TRANSCRIPT--- I mean, why add complexity if you don’t get paid for it? You have to get paid a lot to add complexity. Otherwise, the complexity is not worth having there. If you put the complexity in, you will have a much more difficult time executing it. It’s much less likely to work because it’s probably just over optimized. You If you use your 10 indicators that has to be working together and give you the signals, well, odds are that it’s just happened to work because you over optimized it. You You fitted perfectly to the recent past. Now, when I When I wrote my first book, I thought I made it very simple, the trading model. The whole point with the model I showed in the first book, following the trend, is that it’s supposed to be a very simple model to describe generally what the trend following industry does. My biggest regret with that book is that I didn’t make it even more simple. Much to my surprise, no one raised that concern. I didn’t hear it once. Instead, my book took off in a way that surprised both me and my publisher. After 2 years, my publisher tells me that I, against all odds, ended up in the top 5% of finance book authors. It was a fun ride, and I learned a lot along the way. This is a quote from the preface of the latest book written by today’s guest. Imagine spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes, and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today’s conversation, remember to keep two things in mind. All the discussion we’ll have about investment performance is about the past, and past performance does not guarantee or even infer anything about future performance. Also, understand that there’s a significant risk of financial loss with all investment strategies, and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here’s your host, veteran hedge fund manager Niels Kaastro Larsen. Hey, everyone, and welcome to another episode of Top Traders Unplugged. Thank you so very, very much for tuning in today. For those of you who are regular listeners, you know that my goal with the podcast is to share the stories of some of the great traders in the world, and to ask those questions they don’t usually get asked to help you get more clarity, confidence, and courage to take your own trading or investment career a step further. Today, you’re listening to episode 91. If this is your first episode you’ve heard, you might want to go back and listen to all the earlier conversations. Before we find out who’s on today’s show, I just want to mention that today’s episode is brought to you by Eurex, and given all the current market volatility relating to US rate hikes and the slowdown in China, you’ll find some very useful ways of hedging your portfolio risk if you visit the Eurex website. This is Andreas Clenow, chief investment officer of Acatis Asset Management in Zurich, and you’re listening to Top Traders Unplugged. And by the way, if you want to read the full transcript of today’s episode, just visit the toptradersunplugged.com website and sign up to receive access to all of them. Now, let’s get started with part one of my conversation. I hope you will enjoy. Andreas, thank you so much for being with us today. I really appreciate your time. Thank you, Niels. Happy to be here. Good. Now, Andreas, today we’re going to make full use of the many talents that you have. On one hand, you are running your own systematic investment strategies, which requires a lot of the various disciplines that I often discuss with guests on the podcast. But also, you allocate to external managers, which is a rare combination, so perhaps we can touch on this skill set as well. And of course, many people knows you as the author of two books. The first one, Following the Trend, which caters to an audience that is interested in the classical way of using trend following strategies on a basket of futures contracts. And your latest book, Stocks on the Move, which goes into why and how you need to trade stocks when applying a rule-based approach. Is that a fair summary, you would say? Pretty much, yes. Good. Now, for full disclosure, Andreas, I read your first book a few years ago, so I may not remember all of the details, and I have read most of your latest book leading up to our conversation today. But I’m I’m sure you will guide me to the more juicy bits of both books during our talk. But before we jump in, I just have this simple question that I try to ask all my guests in order to appreciate the different answers there is to the question. And basically, it’s how you respond when a person you haven’t met before ask what you do. How do you explain what you do, Andreas? Well, I have this running joke back in Sweden, anyway, when someone asks me who has no insight into business whatsoever, I just shrug and say that I I make rich people richer. That might not be the most accurate description, but it’s it’s funny enough. What do I do? Well, I am chief investment officer of a a little bit different shop here in Zurich. We are kind of family office. That means that much of the capital that we manage belongs to to us, the partners, me and my partner. That gives us a large degree of flexibility. We can do, well, what we think makes sense with this pool of money. We can We can create our own strategies. We can take in investor money since we are also licensed asset manager here in Europe. We can invest in other people’s products. We can do private equity deals. We can do all kinds of deals and investment that makes sense. Obviously, if you if you manage a reasonably large pool of money, it doesn’t make sense to put it all in one strategy, not even if it’s your own really great strategy. Therefore, we do a lot of different things that usually surprises people that we’re in so many areas. Obviously, I’m as you say, I’m mostly most mostly known for the systematic systematic side, primarily because of the the two books I wrote about the subject. But that’s one out of many things that we do, really. Sure. No, absolutely. But I’m going to stay with your story at least for a little bit longer because I’m I’m curious to know how you got to where you are today, and and I wanted to put some extra color in that. So, so tell me a little bit like, you know, what were you like a kid or a young man growing up? Where And and and and where that all took place? Let me see. I’m actually from a very small town up in uh up up in rural Sweden. Pretty much the Midwest, the Kansas of Sweden, if you like. It’s the kind of place where you look around and you see a flat horizon in all directions. It’s It’s a town that really, I’m not making this up. I couldn’t make this up. It’s a town that uses the slogan “most cow dense city of Sweden.” Town, to be to be fair. There’s more more cows per square meters than anywhere else in the country. That is the tourist slogan of where I’m from. So, you see where we start in the story here. Sure. Absolutely. Now, I never saw I never saw a cow in my life growing up, but, you know, that doesn’t let me escape the the reputation of the town itself. Sure. Um I I went to school in Gothenburg, and when I was there, I got increasingly interested in in in trading, well, in two topics, actually, in trading and computers. Okay. Computer interest I had for many years before, but I guess I I kind of developed the skills a little bit better during those years. I studied finance in in Gothenburg School of Economics. And these two things kind of started melting together more and more. Sure. I started a computer consulting company back in those days. This was, of course, mid early ’90s, and well, who didn’t have a computer company back then, right? Right. It was almost too easy. I mean, if you if you knew computers back then the way that most people, well, pretty much everyone knows computers today, if you had had a decent base skill, well, you were in demand back then. Sure. So, me and actually a lot of my buddies back then were running similar type of companies. We’re doing training, programming, servers, networks, computer security, these kind of things. During this time as well, I I got more and more into into the whole trading thing. I read a lot of trading books. I got into all the deep the deep rabbit holes of of technical analysis, all these things. Um that, by the way, I think we might return to that later, if I know you’re right. But that’s that’s probably something that makes me a little bit different than most people in my situation. Uh I find it unusual that uh that people, hedge fund managers and the like, come from the normal background, so to speak, a normal retail trading background to begin with, of reading TA books and all these things. That’s uh on the unusual side, I think. And that’s People thought good and bad for me, but anyhow, um I had a company back then, and I figured some sometime late ’90s that it was time to kind of grow up and do something real for a living, and I uh I left the whole entrepreneurial thing and joined a company that was back then called Reuters. Now it’s merged and called Thomson Reuters. Uh I was head of their financial consultancy up in Nordic for a while. This was interesting, I have to say. It’s an interesting learning experience to be on the corporate side for a while. Sure. Uh I learned a lot about corporate world and most of all I learned about how I don’t really belong there. Well, I I realized, funny enough, I think a lot of people realize the same thing, but the the better you get at something in that kind of environment, the less you get to do it. Right. This one learning experience. The other one was that, well, if you want to get something done in a corporate environment, you have to break the rules. Sure. And then you have to be be lucky and get away with it. I’m I’m not talking about regulations or any, you know, laws or these kind of rules, but rather the the rules that tell you that here is your box and here is what you’re allowed to do in the company and here is what you’re allowed to have opinions about. Yeah. So, what I what I what I figured out quite quickly, and I guess that’s that’s where I’m heading with the story, why I I changed everything in the end. What I figured out is to get something done, to get ahead in in a corporate environment, I had to just go ahead and do what I was sure needed to get done, whether or not I was authorized to to do this or not. Instead of the usual, you know, committees, approvals, uh teleconference and project managers and discussions and so on, I just got it done mostly by myself in evenings and weekends and uh presented Sure. And what usually happened, lucky me, is uh a lot of people want to get me fired, a lot of other people want to promote me, and lucky me, the people who wanted to promote me won. I got away with that a few times, and a few years later I was uh head of Reuters quant development team in Geneva for equities and commodities. And I was slowly starting to get increasingly cynical about it. At that point I was learning that the better you get at getting things done, the better you are getting things done, the less they let you do it. Sure. I found myself in the end at the age of well, before 30, I guess. Uh I don’t want to think back how old I am. Uh somewhere around that age I figured out that here I am in teleconferences all day talking to people who talk on teleconferences all day discussing head counts back and forth, discussing projects and budgets for things we all know has no real meaning anyway, right? Mhm. Things that doesn’t really matter. We’re just fighting over should Geneva do it, or should Paris do it, or should London do it, and we spend half a year and I don’t know how many millions on discussing this. And I was increasingly feeling that, you know, it’s it’s nice. I have a nice title, they pay me nice money, but I can’t keep doing this. For my own sanity, I can’t be here in 20 years. Uh nothing nothing bad about Reuters. It was a nice company to be with. I think this is a phenomenon you find in all large organizations. Sure. This happens after a while. Well, how do I move on from there to Exactly. That’s good. So, corporate corporate world, and then at some point you I guess decide to enough is enough. Yeah, basically. Um I did what I what I tend to do a few times when I I when I done a few times in the past when I felt like I was either in trouble or I needed to get something change something. Um you you you basically raise a flag and hope that hopefully a friendly sees it. Uh make yourself visible. Sure. And someone will find you. I did that. I got a bit lucky back then. Uh this was well, 10 years plus ago, something like that. Sure. I happened to by absolute coincidence run into people who had large sums of money they needed to have managed. They had some basic idea on how it should be done, but not really the details, and they don’t want to do it themselves. Sure. I understand completely how improbable this whole thing seems, and that’s what it seemed like to me at the moment as well at that time as well, but that got me into the whole hedge fund space. We started up a hedge fund back then over back in those days it was quite straightforward to start a hedge fund, at least over here. Sure. Uh regulations, well, let’s just say that wasn’t too important for the regulators at that time. They regulators allowed all kinds of things that today would be impossible. Uh you set up offshore hedge funds in the Caymans, and well, it was quick, cheap, and easy, and compliance and all of these things was minimum. Now it’s a whole different world. Today it wouldn’t be possible to do what what we did back then. Uh not not legally anyway. I’m sure people do it, but back then we could, within the current framework at the time, do these kind of things, which we we couldn’t have done now. So, I I kind of got lucky and what’s the expression? I I stepped in a banana peel and slipped into the business. Um Obviously, I had some background to begin with. I had, hopefully, a decent preparation for what I jumped into, but things developed quite well. I had a couple of more times where things kind of happened in the right direction, but in the end my my my general philosophy is that you have to for these seemingly improbable things to happen, you have to create the circumstances for it. Sure. If I can just stop you there, I’m I’m just curious because so you say you meet some people who have money to to be managed, and then you you start a hedge fund, but at at what stage had you already started managing your your own money? Did you have a strategy? I mean, where does that fit in? Because usually even rich people don’t give money to people who don’t have some some level of of uh you know, experience in in what they want them to do. So, so where did that start? Okay. I I obviously I had been trading my own money for for a long time, but at the time I would say my money was in the context of things fairly insignificant. Sure. Uh Reuters paid me well, but not that well. Uh I’ve been Well, I started out with like most people, I guess, and who wants to get into the business. I started out building trading systems back was already back in mid-90s. Uh simple you know, MetaStock, TradeStation, what was it called back then? Sure. Yeah, the the usual suspects of of technical analysis programs and of course, now looking back I realize just how how amateurish those things were, but, you know, we all have to start somewhere. I remember I was building a point and figure plotter in Excel that automatically reads real time from Reuters and and makes a point and figure chart in Excel. I don’t know what that’s good for, but I I did those kind of things anyway. Okay. Uh I guess my trading, if you want to step back to that, in the beginning I I liked trading back in the ’90s, and I thought I was really good at it. I made very good money. But you know where I’m going with this, don’t you? Sure. Who didn’t make good money trading Exactly. Long long technology stocks. Oh, yeah. I I was I was really smart. You know what I You know my strategy? I bought Nokia. Right. That’s the strategy. This is the ’90s, come on. Anyway, most most people trading back then were trading the long side of the equity markets, and it didn’t matter what you threw the dart at, it’s going to hit something profitable. Yeah. So, I I guess I got lucky. If I had started trading you know, in I don’t know, ‘99, 2000, something like that, I would have taken some losses, and I would have, you know, done something real for a living instead. So, what do you So, what do you think that the people that you met, what did they want you to do specifically initially when you started off? Well, they wanted me to develop They had They had They had some basic idea trading ideas that they were unable to develop, to test, and to implement. Okay. And they needed someone to do this full time as well. Mhm. Which they were not prepared to do at that time. I guess we spent a few months discussing the whole thing. I built some Sorry, some some prototypes for them. And this is also something I always keep stressing in my books and website and things that programming skills are absolutely vital in this business. Sure. Doesn’t matter if you plan to be the cool hedge fund manager with a staff of of 20 programmers, you have to learn Mhm. at least basic programming, simple programming that is. Yeah, I developed some things. Uh we launched with uh Let me see, what was it back back then? It was It wasn’t big, but it wasn’t insignificant. 30 40 million, something like that, I guess. Uh which was a decent enough starting base back then. Absolutely. Still is, I think. Yeah, it’s uh it is enough to start with, for sure. And we did well for for a few years on that, and yeah, it was fun for a while. It’s not It’s not the the fund or the company I’m with now, and I left that on well, some years ago. I can’t really remember the time frame at the moment, but I don’t know, six seven years ago, something like that. And moved to my present position at ASIS. Sure. Uh ASIS is not That’s the question I always get. It’s not some sort of abbreviation based on my name. Uh the company has been around since uh 1995. And back then, well, back then I was trading I was trading Nokia, so I was old enough to I was old enough to be part of ASIS back then. Sure. Absolutely. And um obviously, we’re going to talk much more about what you do today inside ASIS, of course, but just just before we jump to that, uh you know, of course, writing books and and running your investment strategies is a big part of your life today, but what do you do when you’re not working? What do you like spending your time doing outside the office? Oh, that’s an unusual question. I’ve never got that in an in an interview before. Sure. Uh well, should I say uh long walks on the beach and reading a good book? I don’t know. What was the What do I do? Well, I like photography, actually. Okay. One more little bit more more normal thing I do. Sure. Uh then, of course, between that and family and small son, well, how much time is really over? True. True. Excellent. Now, you’ve written a couple of books about systematic trading strategies, which usually involves a lot of math and equations, but you’ve actually managed to write them with very little math being being used or shown. And I think you’re what you’re trying to promote is the importance of trading broad concepts, not complex super systems, so to speak. Explain to me why this is so important in your view. If you trade what most of us see as as a normal type of systematic models, I mean, I’m we’re excluding excluding here the high-frequency stock things because that’s a whole different ballgame, but normal systematic strategies, usually they’re about trading broad concepts. I I always see an overfocus on on details. Usually details that don’t really matter. So, if you you can discuss with if I discuss with retail traders who contact me because of the book and these things. A common theme I always see is this focus on the most tiny details, things that I I wouldn’t even bother with. So, therefore, I I I try to focus on I try to emphasize the larger things. Like for instance, you can talk about do you use when you do you measure trend would you use exponential moving average or simple one or a weighted moving average and well, my only answer is I I don’t really care. What’s going to be the difference in the end? Sure. Timing. Sure. It’s going to be a rounding error. So, people strive for perfection, but essentially perfection is not needed in in in this particular instance. I think it’s a misconception. This focus on the details, I believe this comes from it’s it’s comes very much from the TA school, I think, the technical analysis school. Right. Where people already have all these books about 100 different indicators and the the five different settings on each and how you can tweak the parameters and how you can optimize things and it doesn’t work like that. Uh you won’t really find a hedge fund manager sitting there optimizing his 10 indicators that he’s combining to to get to the perfect buying signals. No one really works on that on the on the institutional side. It’s just this is a bit of a retail illusion. May you find what kind of phenomenon you want to exploit, what kind of strategy, and it’s never about the best possible strategy. There isn’t a best possible strategy. You you find a style and try to find a good way to trade that style. Sure. Sure. Ju- just as a quick follow-up and I know we it’s it’s very related to what we’ve just talked about, but I mean, you also refer to the value of simplicity and how very simple rules can perform remarkably well. Tell me a little bit more about the the findings and also how you you know, got to that conclusion. I mean, was it just through testing or or was there something else that that made that very clear to you that actually simplicity is really, you know, it does really work? Mhm. Well, you have to be right of it that the simpler systems are usually the better ones. What do you mean by better, by the way? That’s you know, something I often get asked and and you know, how do we define better in this world, do you think? you’re you’re right. Better is actually a bad word. Um Mhm. What’s a better word here? Are you thinking sort of risk-adjusted returns? Are you thinking when you Exactly. I mean, why add complexity if you don’t get paid for it? Sure. Uh you have to get paid a lot to add complexity. Otherwise, the complexity is not worth having there. Mhm. Uh if you put the complexity in, you will have a much more difficult time executing it. It’s much less likely to work because it’s probably just over optimized. You use if you use your 10 indicators that uh has to be working together and give you the signals. Well, all of a sudden that it’s just happened to work because you over optimized it. You you’re fitted perfectly to to the recent past. Sure. Now, when I when I wrote my first book, I thought I made a very simple the trading model. The whole point with the model I show in the first book um following the trend is that a point is it’s supposed to be a very simple model to describe generally what the trend following industry does. Right. My biggest regret with that book is that I didn’t make it even more simple. Um How could you have done that? Quite easy, actually. And I have to say I have to give credit where credit’s due. The suggestion came to me after I wrote the book by I think you know him already, Nicole Colucci over in New York at at Quest. Absolutely. He’s a very good asset manager. Definitely. So, his suggestion was, well, did you try just looking at a just a 12-month return, nothing else? At first when he suggested that, I thought, well, like everyone else, he’s got to be kidding. He wasn’t. And I did the math on it. I came back and said, yeah, you’re right. I I should have done this. For two reasons I should have done that. Both because it’s simpler and therefore nicer. Uh and it would also prevented the unfortunate side effect I see sometimes in my book where people mistake my demo system that I made for to explain the phenomena, to explain the it’s like a teaching tool. And once in a while, people contact me and they seem to think I meant that this model is like a perfect trading model recommended that people should take these rules and start trading them. Give it 10 years, they’ll probably give you okay return, but this model this this rules not meant as an advice on how to trade. They were meant as a description of what what the business is on average. So, what did Nicole mean by an annual system if if I heard you right before? Sure. Um this system is often called the this type of system is often called a 12-month momentum rule. Uh or 12-month return rule. What you do is you look at two data points. So, what was the price yesterday? What was the price a year ago? Is it higher today or higher higher yesterday or lower yesterday than it was a year ago? Sure. If yesterday’s price is higher than it was a year ago, then we go long. If not, we go short. And that’s pretty much it. And you do that on a diversified basket of futures. So, this is, you know, something that would give similar performance as what you demonstrated in the book using a different set, maybe a more classical way of doing trend following. It would actually, embarrassingly enough, it would give better results than the model I presented in my book. Okay. Uh of course, this is the big disclaimer here. This is of course based on a couple of uh a couple of assumptions. First, you have to trade a broad universe, as you say. Applying this on one single market, well, maybe it works, maybe it doesn’t. You apply it on on 50 to 100 different futures markets, so far it works fine. Of course, you have have to have some sort of of uh risk allocation method or position sizing if sizing if you will. And uh what I use there is a classic just a volatility model, which is quite normal. Then of course, the big downside with this type of model in reality is that you’re in all markets at all times, which means you’re eating a very high level of margin to equity. Sure. But what about so so the interesting thing is that you’re not trading that model as far as I understand. Nicole is not trading that model. What makes that model interesting on one hand, yet I I’ve not come across anyone who trades that kind of strategy. No, no. I wouldn’t say go out and trade it exactly like this. But as a learning tool, it is amazing. Right. And it’s a benchmark tool as well. Obviously, you develop your own rules the way it makes sense to your your type of strategy, what you want to accomplish, but benchmark against this. If you can’t beat this model, well, then you might have a problem. Sure. Now, it’s just not that I intended to go down that model because obviously I didn’t know you’re going to bring it up, but I I’m now I’m curious. And that is, does this model, because we’re going to talk about that later on, does this model does it require the full diversification, meaning that’s what trend following often benefits from, I eat the diversification between different markets, or could you in theory, not that I want to jump too much into what we’re going to talk about, but could you also apply the same methodology to 50 different stocks or 100 different stocks? Well, you could, but the results would be different. Um you have to do things a little bit different there about on the stocks and I I would assume that you want to wait for Let me Let me jump Wait and not not Let me jump into that already, but anyway, um but to to answer your question briefly in a way, uh you do need a broad set of things. Otherwise, you apply this just to to one or even to five markets, well, it could happen any anything could happen, really. You can get some very weird results from that. Let’s dig into the books a little bit and we’ll probably discuss ideas from both books a bit randomly, as we’re already doing now. So, apologies for that. But I wanted to start out with just some general observations that I have made looking at your work and some of the ongoing publications you produce and and that you appear in. And the first one is about trend following, where you often refer to trend following as being an easy, simple strategy, where and I’m quoting, where anyone can find basic rules on the internet. And the fact that it’s you know, it it does not that many ways it can be done. So, my question is, um why do you like describing trend following in this way? You don’t say easy? I don’t know, but I got that’s the feeling I get when I read some of these things. And I don’t mean to be taking the other side, but there could be a reason why you’re describing it this way. Sure. No, I was just surprised little bit but easy but then again I write a lot of things that I I can’t keep track of it myself. Um Easy, yes. On one point on one side you can say easy. The rules themselves are often easy. Right. Uh you look at the rules, the trend following rules are usually not complex. Sure. That’s not where the complexity is. Is it easy to to implement this? Is it easy to to run this in reality? Well, not always. Uh then there’s a matter of course if if you run a fund or a larger mandates, you you probably don’t just run one trading model. So, how do you combine this? How do you do risk management? There are a lot of there are a lot of variables that come in in reality. But, in theory if you want to design a trend following model in a simulation platform, well, that’s not terribly difficult. Sure. Sure. Sure. And if I can just sort of add my two cents, I mean, I agree with you that the concept of trend following is is simple. But, I think as soon as you get beyond that, it’s really isn’t that easy to find the you know to find rules that one can stand the test of time and also can produce a relative return to the drawdowns that comes with it that most people can can stomach. And what I find really interesting at the moment is that the return dispersion between managers that all have maybe 10, 20, 30 years of experience, that dispersion seems to be on the rise and to me that means that a lot of people with a lot of actual experience is having to find slightly new ways of doing trend following in order to stay competitive. So, so I agree with you there are some sim- simple things besides to to trend following but I think there’s a it’s becoming a little bit more complex in my Sure. And and you also there there’s one thing that it’s not it’s not a reason why why you see what you’re seeing, the differences between many managers. Okay. But, obviously some differences are due to their different different speed of the trend following. Some is due to their different focus on different asset classes and so on but this is old news. We all knew this before. At least those of you who read my book and you all did, I hope. But, the new the new thing, well, reasonably new anyway, is that the number of pure trend followers is now quite small. Right. Now, most of these most shops in the CTA industry they’re primarily trend followers. Not all of them but most of them are primarily trend followers. That doesn’t mean that the trend following is the only strategy or even always the dominant strategy. Mhm. There has been a trend for well, for some for some years now to combine strategies to reduce volatility, to find ways to to cover the the drawdowns. You introduce carry strategies, calendar spreads, you introduce counter trend models. There are all kinds of separate say satellite strategies like I I can call them that you introduce as overlays. Yeah. Now, this has in sometimes for some funds it’s worked out fine, for others it backfired. But, this is in my view the main the main cause in this let’s say the the increasing divergence in performance. Sure. No, I think that’s a very valid point. Um and also just want to mention that I I really like your analogy about trend following where you you compare it to to watching a scary movie where you say that the happy ending is never in doubt but it takes a lot of nerve to sit through the whole film and and just like we have you know the emotional roller coaster that trend following gives us and indeed any other investment strategy, you know, once it’s live and it’s real money and you’re having a real drawdown, it’s it’s a different thing than than just looking at a And you’re there’s another important thing as well I want to mention on that topic is that you can’t just blindly follow the rules. I mean, even if you have great rules that worked great for you for 30 years, there might be situation coming up that just did the curve for 30 years. Sure. I mean, take this year ago for instance, what happened in the in the Swiss say when they when the when the when the peg or the floor was um Sure. what was let go. Now, that caused some for some CTA funds it caused extreme moves up or down. Yeah. For most it didn’t do that much but I would say it shouldn’t be a big event for a trend follower. Mhm. Now, the models may may think so. You run your simulation and you might get some really extreme stuff there but if you actually took those rules, if you actually followed them completely, then you have to stop and question. I mean, how why did no one do any critical thinking here? Uh I mean, for instance, there there were there were three main positions that would be concerned, right? You have the the Euro future, the Swiss future and the Euro Swissy future. Sure. So, why would you trade both the Swissy future and the Euro future for instance? I completely understand trading the Euro future but the Swissy future would have given you the exact same position on a very high corre- correlated basis. Yeah. And of course if you had that position, if you were short the Swissy all the way down, well, then you took a massive hit that day. Mhm. Uh if you were in the the RF future, the Euro Swissy, then you really have to wonder here because then stuff things can get really dangerous. Sure. So, you have you had an artificial low volatility. Yeah. Which means a standard standard models which would use some sort of volatility position sizing, they would tell you to take an absolutely insane position size. Yeah. Those who followed that, well, those are the ones who saw the 25, 30% up or down that that month depending on what side they happen to be on. Sure. Now, I mean, that’s a very good point and one thing I I recall from having uh last year interviewed a few managers around that time of the move, my good friend Jerry Parker actually in the interview I did with him which is just a short review, he said, well, you know, you always have to put in a minimum level of volatility regardless what the actual volatility is. I think a lot of people if they didn’t do it before, they’d certainly do it now because it’s not going to be the last time we see these artificial volatility and I guess even December uh was a good example when we had the ECB decision which obviously caused some of the short-term European bond markets to to move quite extensively. And again, you know, if you don’t have a minimum volatility for individual markets, you’re going to run into trouble. Exactly. And you have a similar situation in actually right now you have for quite some time in primarily European star markets. That is the the short-term interest rate markets. Right. Because there you have a very clear asymmetrical risk which your trend models would be completely unaware of. Yeah. So, you’re trading over 100 which means the the settlement that would imply that the banks are willing to lend to each other in unsecured basis and pay for the privilege. Now, we might stay there for a while during this extreme situation. We might even move up a little bit but either either we we move a tiny bit up or we can make a huge move down. Sure. So, there’s a very asymmetrical risk and these things you have to take into account. You can’t just run a trend following model and close your eyes. Absolutely. That is true. Now, I think a lot of people who look at the stock markets and as as we as human beings, you know, we have a tendency to only focus on the sort of the recent history and and since we’ve had a bull market now for 6, 7 years, it would be natural to conclude that doing trend following on stocks would be very straightforward and very profitable. But, there’s a problem with that logic when I read your book. Explain to me what the issues are in in in in doing that. A couple of issues. Let me say let me start with uh in the book I made a clear distinction between trend following and momentum. Right. I understand a lot of people have asked me about this but obviously I’d made that semantic distinction there to make a point. Because in my view it is very different. Uh the alternative would be to say that trend following in stock on stocks works differently than trend following on futures. Uh that’s also correct but it’s easier to make the point if you use a different terminology and therefore I was very deliberately using the momentum term instead of the trend following term in the book. Uh to make sure people understand what I’m talking about. Now, the differences is uh as you know, when you’re running a trend following model on on futures, it works because you’re trading so many different things. Maybe for next 2 years the commodity futures will fail completely. Maybe there’s no trends there. Maybe you keep losing there but maybe you make all your money in in the currency futures or in the in the bond futures. That’s in the end the entire rationale for the trend following type models that most markets fail fail most of the time most of the but there will always be something that will produce enough profits to make up for it. Sure. And when you trade stocks, well, the good thing is you have a lot of different instruments to choose from. You have thousands and thousands instead of just a hundred or so for for futures. But, on the other hand, you’re dealing with a with a lot of instruments with very high internal correlation. Mhm. Uh you’re going to gain at the same time you’re going to lose at the same time. Most importantly, you’re going to lose at the same time. Uh things might look reasonably uncorrelated on the upside but then like this week, the market goes down and guess what? All the stocks, even the great ones, will take a big beating at the same time. Sure. Your risk models go out the window. Uh the other problem is of course which stocks do you trade? If you trade futures, you have the luxury of trading all of them all the time. What’s the problem? You have a hundred or so to choose from, right? Anything that trends, you can take. Any signal you get, just get it. Now, in a bull market, you will get a buy signal on every single stock out there. Well, most of them anyway. Yeah. You can’t take them all. You need some sort of ranking method. Otherwise, how do you determine which stock to buy? Mhm. And to say you do normal trend following, that would mean you stay in it until it stops going up, right? But the problem with that is in a bull market everything goes up. It doesn’t mean that this is the best stock to have. Sure. The stock might go sideways or slightly up and you’re sitting on this for a long time wasting your your your capital on it while other stocks are skyrocketing. So, you have to trade it differently. That’s why I presented the book I present a model to uh to rank the stocks, the peak stocks in a in a systematic way to decide which stocks to be in. Uh to decide when you close them out when another stock is performing better. Mhm. And I will say the single most important thing is um don’t buy stocks in the bear market. You have to have some sort of filter for what is the overall stock market doing because you can’t just expect stocks to move up in the same same extent in a bear market. That is, if the general index is falling, you can’t expect to find a lot of great buying opportunities in South Africa. True. So, your rules should be aware of what’s going on in the overall market. So, that’s the main the two main differences you would you would flag because there’s another one I’m sure you you you’re going to come to that anyway and that is of course that in your momentum trading strategy for stocks, um you don’t go short and in fact you go as far as saying that shorting stocks is a is a fool’s errand. Tell me more about the the the reason behind this. Most people lose money on shorting stocks. Shorting stocks is very very difficult. Sure. Can it be done? Are there people doing this for a living and making great money? Yes, of course there is. But it doesn’t mean it’s easy. It doesn’t mean that most people should do it or should even try. Stocks that are in a bear market are very very difficult to trade. They have a tendency to behave very violently. So, you have small moves moves down keeps ticking down day after day, week after week and suddenly you get this one day move from events coming out, some some bank, some government coming in, whatever else happens and you get a messy move against you and you lose all your money in a day. Mhm. This happens all the time for stocks. Sure. A share goes down a lot because of horrible conditions. You’re short for for months and everything is great and then of course some other company realizes it’s a great takeover candidate and they buy it and you lose all your money. Uh shorting in general for everything is much more difficult than buying. Mhm. Especially if you have have a longer term time horizon. Sure. Uh stocks are even worse, of course. Sure. I wonder, I mean obviously people should go and and buy your book and and and read about how the details are in in in terms of of how to trade stocks the way you suggest, but but I just have a I’m just curious about something. Okay, if we take the the the the you know, your your suggestion about buying stocks that move up, essentially that’s what you’re saying and you should buy the ones that have the most momentum and you shouldn’t short them and you should have some kind of uh filter for the environment which I by the way I’d like to talk to maybe a little bit more about that bit, but could you add, if you don’t want to short individual stocks, would it make sense at all to to short say the index uh because obviously we know that there are some good moves on the downside in equities once in a while. We haven’t seen them for a while, but they do occur. So, have you ever thought about uh sort of that uh as a as a Uh possibility? There’s a there’s a lot there’s a lot of things that make sense that I at times would recommend against, especially the books because frankly most people reading the books are retail uh retail traders and I try therefore to to err on the responsible side if you understand my point. Sure. Sure. Uh do I short stocks? Do I short indices? Yes, sure. Of course I do. Uh not in a huge extent. It’s never a main strategy, but yes, of course. Yeah. Uh you can look at if instance if you even if you want to look at beta neutral strategies and this kind of things where you try to short short out the index completely. Um it’s fine if you really know what you’re doing and you really have the the models so to monitor it and you understand the uh the potential risk with it. For most people it’s not a For most people it’s not a good idea, but uh if you know what you’re doing, you understand what’s what’s what the risks are, then why not? Sure. Sure. Sure. Sure. Sure. Now, again, I’m just sort of jumping around a little bit on on on sort of different different topics and and feel free to to go down other ideas that you want to talk about, but but a lot of people in the money management business, you know, they’re usually very focused on explaining, you know, what they do and how good they are at doing it in order to convince investors to let them manage their money, but but you do it slightly differently. You spend a lot of time giving away specific rules as to how investors could do it themselves instead of giving you the money so to speak. Why why is that? And I’m sure you have had this question before. Yes, or variations of it. Or variations of it, yeah. First, why why write a book? Well, I had fun doing it. I wanted to write a book. I wrote a book. I had time. Most people don’t have time. Most people are not allowed to. Most people are employed in a capacity where they either all the time is gone or they are not allowed to do anything like that. I have my freedom. I do what I like. I wanted to write a book. Uh why do I give away these secrets? Well, frankly all all the wrong people. I think I wrote that in one of them that all all the wrong people know this anyway, so who am I really hiding it from? Uh what I write in the books is hopefully there are some ideas here and there even for the professionals, but no one’s really going to read the book thinking that this is great. I’m going to go put a billion bucks in the market and and exploit this idea. Uh the people who manage large amount of money, the people who have who run hedge funds, it’s the management shops. They have quants employed. Either they already know what I wrote write in there or they can figure it out. Mhm. It’s not that it’s not something really revolutionary. I tried to explain it in a way that hopefully the way I explain it is new. Hopefully I can contribute a little bit with this, but there’s nothing really secret in there. And to be completely frank, I think the strategy of getting a little bit well known by by the books has paid off. Yeah. Uh there’s been a lot of investments, uh a lot of businesses coming in because of this. People who Well, people wrote the books, contact me over the websites. They um come with a couple of questions and maybe something comes out of it, maybe something doesn’t, but never hurts. It never hurts. Now, but I do have a follow-up question. It’s not specific to to to your books, but but clearly there are a lot of choices today where investors can either read a book or buy a system and they might get this false idea or hope uh that you know, by following, you know, whatever they they they they buy, they they will become a great trader and and something clearly, as you described before, certain things you you have to probably leave to to the professionals. So, my question is really, do you have any advice to people who either read your books or other books or buy some of these things that we all know is available out there in in in in in on the internet as to how they can determine if they are equipped to do it themselves or whether they’re better off letting their investments be managed by other people. How how can how can people figure that out? You have to you have to of course look at your own situation, see what kind of knowledge do you have to begin with. Look at the material you’ve been reading, see if it doesn’t make sense. I think the most important thing to look at when you read different material is to see what does it promise or imply about your probable and imminent success. Uh if someone writes book material or coaching, something else and they promise that they uh Yeah, if they make crazy promises. If someone says they uh they train millionaires for a living and they make people normal people into millionaires in you know, a year or so, they promise triple digit returns, well, no, it doesn’t work like that. It doesn’t exist. If you’re even considering something like that, well, then you’re probably not at least not yet equipped to to manage your money because then you’re believing in things that are very impossible. But staying in the realm of of sanity, well, the first thing is take very low risk. I would say the main mistake that retail traders do is that they take on risks that that would get people fired or or worse in the hedge fund world. Uh people say that we take a lot of risks in the business, but when I see what what retail traders do, well, that’s that that that goes on the crazy side. Um you have to have realistic expectations and of course that’s usually where it fails because with realistic expectations, it’s no longer interesting for for many retail traders. When you start understanding that a compound return of say 15% or so, maybe per year, even 10% a year over time is considered to be quite good. Mhm. Then a lot of people lose interest. Um but of course if you aim for 50% or 100%, you will most likely well, most likely you will lose most of your money before you learn the mistake. You have a couple of good years, couple of bad years and wild swings and hopefully you get out before you lose everything, but no one in history has sustained such a high return. Sure. I guess on on this topic I I noticed a blog post you you wrote and I don’t remember exactly when that was written, um but it was titled something along the lines why managing your own money is a bad trade. Tell me Tell me a little bit about about that one. Yeah. Obviously, my headlines are usually written in a way to get people to click on. But as as I like to say, well, if you’re going to clickbait people, you have to at least deliver afterwards. So, I try to make sure there’s some actual content to back up my my sometimes uh Cheeky cheeky titles. Cheeky cheeky titles. Yes, exactly. But as long as you try to deliver. Um Well, it’s a bad trade. What I try to point out there is many people have this dream of trading for themselves. Mhm. And I understand that, but I would suggest modifying that dream a little bit. A lot of people saying that the biggest dream is to be able to sit at home or have their own office and just trade your own money all day and have a great return and be a professional trader. Well, my point being, if you’re going to do that anyway, why don’t you throw in other people’s money in the bucket, too? Why? Well, because you get a base fee on that and you get a performance fee. You can manage your own money at the same time. That’s not the issue. But just your own money, well, that’s risky because maybe you have a bad year, you make no money, and how are you going to pay for that office and the computer you have in front of you? Mhm. On the other hand, if you have client money there as well, you can do the exact same thing. You can still be a professional trader. Still you still trade your own money for a living, but other people’s money as well. Now you can think more long term because now you don’t have this constant stress that you have to make money before the end of the month, otherwise you can’t pay the bill, you can’t pay your your your your food, you can’t pay the car payments, and your wife’s going to leave you, right? So, what you do is that you have you have this base fee coming in. That means you can you can relax, you can do things more more calmly. You can think long term, you don’t have to take big risks just to make make ends meet by the end of the month. You probably manage your own money better. You probably manage your clients’ money better that way. And everyone’s happy. Sure. I know that at the end of that blog post, you do have some reasons why people shouldn’t take outside money to manage. Um and some of them you refer to as excuses, some of them you refer to as valid. What what What do you think you know, what what what are the valid Are there any valid reasons why not to do it, though? Well, one valid reason would be that you simply don’t like people. You don’t want to deal with people. You don’t want to have to deal with clients. You don’t want to have the the hassle of the uh uh getting investors, uh reporting to investors, possible compliance issues, and so on. Um and that’s fine. If you really don’t want to deal with that, that’s fine. But then you made an economic decision based on your preferences, which economically might not be the best, but fine, it’s a valid reason. Sure. Um another thing is of course, at least here in Europe these days, and you know what I’m talking about there. Regulations are getting um borderline ridiculous. And Mr. Regulator, if you’re listening to this, I have absolutely no problem with what you’re doing in the business. It’s getting very very strict and very very expensive to comply with increasing regulatory requirements. The hurdles of entry are going up fast. I I mentioned before that I got lucky, I got into the business at a time when it was easier and cheaper to start something in the business. Sure. These days, let’s say someone comes to you with a million bucks and asks you to manage, if you’re based in Europe, well, that doesn’t make any sense. Sure. There’s no way you can make any money from that. Someone comes to you with 10 million, well, you’re not going to make enough to have a proper salary, but at least you can start something. So, that that’s very valid reason as well that My understanding is now I have really no knowledge myself about this, but my understanding is that this is still much easier in the US. Okay. Yeah, well, it may it may well be. There’s no doubt that regulation is on the up, and it’s probably not going to end here. So, so that is definitely something to consider if you’re thinking about doing it on your own, yeah. And let me mention I just remember this one more valid reason. Of course, there’s probably more of them, but I just remember one anyway that maybe you have a trading strategy which which you cannot scale. Right. Sure. If if you’re doing, I don’t know, it’s quick intraday scalping back and forth, you take a couple of lots here, a couple of lots there, well, if someone puts another 10 million in the bucket, maybe you can’t do it anymore. So, that’s of course absolutely valid. Sure. So, just for people to to realize this because I’m sure a lot of people will go and look up your your blog and and and and your website, etc., etc., but but again, just to stress the point that that we talked about before, and that is that a lot of the things that you might write about or use a title to, when people see it, I think it’s a good idea just to read the article before they make that conclusion because often you you actually end up arguing the opposite than what you the title might say. So, uh or something different at least. So, so just just be aware of that. Um The thing you learn very quickly when you run a website is that if you have a title about how to use momentum analytics to beat the the S&P benchmark in the long run, no one’s going to read that. Sure. No one. Even if you write the best possible article, no one’s going to read that. Sure. No, that’s true. Now, but staying on that theme and staying about blog post in in general and the fact that you like to have these sort of juicy articles from time to time, you did take a stab, and you even did it early on in in our conversation today. You you’ve taken a stab at technical analysis sometime ago saying that, you know, the visual nature of technical analysis lends itself to get rich quick stories. So, how do people tell the difference between technical analysis and say momentum or trend following trading? How do they do that? Well, common sense, I guess. See, the problem with with technical analysis is there’s no definition of it. Everything is technical analysis. You’re dealing with a price, well, it’s TA, right? I wouldn’t say that all technical analysis is nonsense. I spent a lot of time with technical analysis, especially when I was younger. I I read all all the books. I’ve gone through all the phases like most people. Mhm. I’m sure you can come up with some sort of seven stages of technical analysis model that people go through before they, you know, finally accept it and move on. Sure. There are a lot of weird things in there. And as I pointed out before, some of the technical analysis organizations are really guilty in promoting it. They give it some sort of legitimate What is the word in English? They they legitimize it. So, is that correct? Okay. Yeah. Uh by including it in their courses. There are there are some things some particular pet peeves of mine like Elliott Wave Theory for instance about, you know, how the universe moves in magical waves and you can predict them and so on. You know, these are fluffy things that can never be proven and disproven. And if I say that I come up with a new idea that there’s actually seven magical waves, I’m sure I can write a book about it and I can make a lot of money from it, but no one can prove me wrong, right? Maybe maybe there are eight waves, what do I know? Uh you have funny things like Fibonacci numbers where, you know, you have all these decimals, it looks like there’s something magic with this. What is it? 0.618, I don’t know. If someone tells me that this 0.6, whatever the ratio actually is there, is somehow better than saying approximately 2/3, well, I want to see some math on that, but who was producing that? There’s a lot of nonsense there, but ignoring the more ignoring the new age nonsense, which, you know, every reasonable adult should be able to ignore anyway, then you’re still left with a lot of things that just cloud the picture. Mhm. Like there’s all these indicators for instance. And many of the indicators might have a value, but once you start using an indicator for everything, there’s this old expression like if if all you if all you have is a hammer, you start seeing nails everywhere. And that’s the problem with technical analysis, too, that you you have all of this indicators, you throw you throw a whole bunch of them at the wall and see what happens after a while, right? And it doesn’t mean that you have anything of value in the end. Let’s move back to your books in some way and discuss some of the topics, but in the context of perhaps more than the usual questions that I ask my guest, which relates maybe a little bit more to to your own trading. But before we go there, there’s just a couple of topics I wanted to bring up that I thought was interesting as well. Especially, I think again, a lot of people know you for trend following or momentum strategies, but actually you also highlighted to me that countertrend models, paradoxically, can, you know, be beneficial in a portfolio. So, let’s explore that for a little bit a little bit more because that’s not something I think a lot of people usually would maybe associate with you. Mhm. Well, there are a couple of types of trend of countertrend models to begin with. There’s one I prefer more than the other. Uh But most people would think about it is the models that just goes against the strong trend. Now, those can be dangerous. Um I don’t always trade those as well, but they’re not as interesting in my view. That would be, for instance, you have a you have a very strong bull market or uh let’s say the oil situation at the moment, it comes crashing down, crashing down, crashing down, and all of a sudden you decide, well, here’s where it stops, right? And you buy. Sure. That that’s one type of countertrend trade. I don’t like that so much. Not that it’s impossible to to to work that way, but I don’t like it so much. What I prefer instead is the type of countertrend models that trade in the in the direction of the dominant trend, Mhm. but enters after a a certain type of pullback in that trend. Right. Now, that type of model came from and this is certainly not a new idea. Uh I’ve seen a lot of other people doing some of this doing similar things in the past. But, the idea here came from the realization that many of you out there probably had that trend following models tend to stop out too early. Especially medium-term trend following models. Right. That that’s interesting, yeah. So, what if we measure where these stops are normally taken and we take the opposite side. Mhm. So, when the long positions stop out Mhm. you enter. Uh easy way to do this and I I think I published a code of this on this a while ago. Must have been a year or two ago even. Uh I published I published this as an indicator half half jokingly as an indicator because I usually criticize indicators. Right. Uh I made an indicator which measures the number of ATR units you are from the recent extreme of the trend. Right. Now, if you read my first book, uh which you claim to have done Sure. you know that that model stops out after three ATR units from the recent trend extreme. Yeah. So, I just made a model that simply buys exactly that. It measures how much how many First, it checks are we in an uptrend or downtrend? Mhm. And based on that, it checks how many ATR units are we away from the most recent extreme. And then when we hit three you buy or short, of course, depending on on the Sure. Sure. up or down trend. Uh as an entry model, it’s not that bad. It works quite okay. Of course, an entry entry logic in itself is not enough to have a complete trading model, but it’s a start. Mhm. But, that’s the type of model I’m I’m talking about. Sure. I just want to mention to people who may not be familiar with the term ATR that Andreas is using, but that is referring to average true range in this case. Um I I think it’s interesting what you say. Having said that, also I would say that um you know, since a lot of people and and I would certainly agree with that that are a lot of trend following strategies that probably in a broad spectrum have similar entries and similar exits and you know, a three average true range from from the last extreme is is probably not a bad estimation of that. It wouldn’t it be Could it be argued that it’s a little bit dangerous to to go against those forces when you’re if you’re trying to then actually join and and buy when they sell and they sell when they buy, so to speak, or or it does that really not really matter when you test something like that? find it to be a high-risk situation. Of course, you need to have some sort of exit model in the whole thing, yeah, but I don’t find it to be any any higher risk. Sure. Uh then of course, you could if you like, you could argue that my plan here all along was to write first a book to make everyone exit the trend models at the three ATR units and then I make a model to take the opposite side and I’m not going to comment on that. I’m sure there’s some cynical people out there thinking that that’s exactly why you did it, but let’s let’s not go there. Now, before we go to talk a little bit about your your your own business, that’s how I call it, but it’s more about sort of your experiences as as running your own business, but but you actually also wrote something about starting a trading business, what it takes, what’s realistic, what people are missing. How would you sum up that kind of theme that because I think a lot of people who listen to us today, you know, a lot I mean, there are more emerging managers than are established managers for sure. So, so clearly that’s something that people I think will would be interested in a little bit as to to what you because you’ve been around for a while, you’ve started a couple of businesses, you know, what you think it it it takes. And we talked about the regulation, I accept that, but Yeah. Uh that cannot be overstressed. If you ignore regulations, I know a lot of people do that. Yeah. Thinking go under the radar for a while, manage some money, no harm done, right? Everyone is in agreement. The clients are happy with it, they’re happy with it. Let’s just go with it, right? I would still recommend against that. The problem is even if everyone’s happy, you’re managing your uncle’s money and he doesn’t care and so on. Well, if something happens, you have a loss, someone gets unhappy, someone hears about this who doesn’t like you, whatever could happen here and regulators find out about this and you are done in the business. You will not be able to go into the business again and take this very seriously. This is not the same business as 10 15 years ago where things were easier on that front. Now, it’s very very strict follow these rules. Uh having said that, starting a business, well, the cost side is the first thing that people miss. Right. It’s very easy to think, well, I’m going to make X amount of dollars per year, right? So, you look at what kind of trading you need for that. But, the revenue side is not the only thing you need to look at in your business, is it? You may or may not need an office. Say you need a Bloomberg or Reuters, well, that’s another 2K a month. Maybe you can get away with something cheaper, I don’t know. But, you will have a lot of overhead costs to begin with. You will have to make sure you can cover this with with base fees. Never never budget with performance fee. Performance fee may or may not come at the end of the year, but if you’re depending on performance fee to to survive in the business, then then the business is not sustainable. It’s not going to work. Then it’s depending on luck. Uh you have to be able to cover your base fees with with your base income. And that’s of course your your um management fee. Uh The difficult to start a business ignoring regulations, disregarding regulations is still depending on where you live. Uh how much money you need at the end of the month left over and how much money your potential staff will need, well, that varies dramatically from place to place. Uh incidentally, you might not want to start a business in in the in Switzerland for that reason. It is not it’s not a low salary place. It’s uh it’s tough to get people for um well, for for decent money here. Or for decent money in many other places, many other countries in comparison. The need for a large base revenue is is a the primary thing and for that, you need a large asset base. Obviously, if you can take between 1 and 2% hopefully in in base fee, just doing the math on that, just paying your own salary takes quite a lot of of of of asset under management, paying all the systems, all the other costs, paying the brokers, paying the the administrator, the custodian. There’s a lot of people who need need to get paid before you see anything. So, the initial asset base that is the key trick. How do you get that? Sure. No, that’s fine. Let’s let’s talk a little bit about sort of more the usual topics that I would discuss with with my with with the managers on and it you know, it somewhat relates to how you then build a strong organization and and let’s assume that you overcome some of these financial challenges that you just mentioned. But, in your case, I wanted to ask you sort of more focus on on on research because that’s something they’ve you’ve done a lot of. Now, investors, they will put a lot of emphasis on the research capability of a manager when making their selections. Uh and clearly research is a large to large extent the heart of a systematic manager. But, you also you know, you also have a a a an allocator or an investor hat to put on. So, if we put that on for a little bit now, what kind of research and capability do you look for when you are looking to allocate money away? Well, okay. Let me take to systematic managers because we um Sure. We as you know, we we allocate to a lot of different things. Uh something I I shouldn’t say on a public podcast because that means the amount of calls and emails I’m getting is going to increase from Almost definitely, Andreas. Yes. Uh don’t worry, I have a assistant to forward them to. Anyway, what I look for, well, first of all, I very very rarely invest Thanks for listening to Top Traders Unplugged. 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