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Opalesque Futures Intelligence

Founders Q&A: Campbell’s CEO looks at the development of the firm and the future of the industry

Wednesday, November 04, 2009

The Campbell Story

Founded in 1972, Campbell & Company is one of the oldest and largest alternative investment management firms in the US. President and chief executive officer Terri Becks tells us about the development of the firm as an institution as well as the evolution of its investment programs and client base. She offers a thoughtful perspective on the future of the industry.

Campbell, located in Baltimore, manages global futures, currencies, and equities portfolios using systematic strategies. Widely regarded as an innovator in quantitative modeling, the firm has constructed models driven by both technical and macro/econometric data. It currently manages $4 billion in assets.

Like any asset manager that has been in operation for 37 years, Campbell has had ups and downs. Through it all, the Campbell Composite Program has returned about 15% annualized since its inception in January 1972. Campbell made 4% this September, with gains from both technical and fundamental-based trading in currencies and equities.

Keith Campbell remains the majority shareholder and chairman of the company, but his main interest is environmental philanthropy. In 1998 he founded the Keith Campbell Foundation for the Environment, which has since then given away $50 million, mostly in grants to clean up and preserve Chesapeake Bay. See

"We want there to be competition; more high-quality managers means more investors coming to the industry."

Opalesque Futures Intelligence: How did you get into this field?
Terri Becks: My background is in accounting and I previously worked for a public bank. When I was interviewed by Keith Campbell for a job in 1991, it was my very first exposure to managed futures, but he was open to the idea of hiring me, with my public company and related regulatory experience. He had already recognized the need to make the business more institutional. What Campbell did sounded very exciting and challenging. So in 1991 I joined the firm, which at that time was quite a small organization. I was employee number 16 and took over payroll from the head of research. Now 168 people work for Campbell, with more than half in research and IT. For most of my tenure here I was the chief financial officer. I became CEO in 2007.

OFI: Is Mr. Campbell still involved with the firm?
TB: Keith participates in strategic planning but he does not run the day-to-day business.

OFI: How has the business changed since you first came through the door?
TB: It has developed in several ways. When I joined the firm, the investment program consisted of trend following in US futures markets. At about that time we expanded to international exchanges and around-the-clock trading. We increased our financials exposure and added over-the-counter FX trading. Starting in 2000, we began using fundamentally driven models that incorporate other economic information besides price data. We've also started systematic trading in cash equities. We have not abandoned trend following, it remains the core of our portfolio, but we are diversified across geographies, investment styles and – more recently – different time horizons. Our multi-strategy program is managed futures with a cash equity trading overlay.

OFI: Did your client base change?
TB: We were probably the first manager to sponsor a public managed futures fund, the Campbell Strategic Allocation Fund. It's on dealer platforms and at one time was the largest public managed futures fund. It did very well and brought us a lot of retail clients, diversifying our investor base. Since then other managers have started public managed futures funds, some sponsored by dealer networks like Merrill Lynch. But we were a pioneer.

OFI: What were the institutional changes?
TB: Regarding the company infrastructure, we made an early decision not to try to escape from regulation but to build the business in a regulated setting. When we got into cash equity trading, that brought us into the securities world. So we registered with the Securities and Exchange Commission as an investment adviser. At that time, the SEC had contemplated mandating registration but many of our peers sought ways to avoid it. We decided we could deal with the requirements, so we became an RIA and launched Campbell Multi-Strategy Trust, a registered investment company.

OFI: Does SEC registration add a lot of work?
TB: Complying with the requirements is labor intensive, but it means we have controls and best practices in place, which our clients appreciate. For instance, we have an independent review of our internal controls. It would be hard for a startup, but we have the resources for compliance and it is a comfort for the clients, especially after their experience in 2008 with valuation issues and frozen assets in hedge funds. We have a third-party custodian for all our clients' assets, not just the public funds. That helps everybody sleep better at night.

OFI: How does growing competition affect the firm?
TB: We want there to be competition; more high-quality managers means more investors coming to the industry. When we hear about a fund blowing up, we're upset. It gives the industry a bad name. But to survive in this business you need to have a large research team and develop new models. It used to be that you could have just one or two models, but now you need new ways to take advantage of evolving markets. The life cycle of a model is shorter because everybody is trying to do the same thing.

OFI: As assets grew, did it become harder to find profitable trades?
TB: We've hit bumps in the road like everybody else. We lived through a tough time in 1993-1995 and we're coming out of another one now. Capacity constraints were always on our mind. When I joined, people thought we couldn't grow beyond $300 million! Then we got to the first billion dollars with no sign that the trades were suffering. What we realized is that as much as our assets grew, the markets we trade in grew faster. Capacity is not really a hard wall, it's more like a rubbery wall. Much as we tried to anticipate capacity problems, we have never actually encountered difficulties executing trades because of our asset size.

OFI: What differentiates Campbell from firms that do not have an institutional structure?
TB: What we have at Campbell is a team approach that does not depend on any single person, so we have continuity. You can find hedge funds and managed futures shops with strong track records, but they have no continuity. If the managing partner retires or is hit by a truck, the firm may fall apart.

OFI: With the growth in assets and the number of people, has the company's culture changed?
TB: The culture that appealed to me when I arrived 18 years ago is still here. Because we're in Baltimore, people who join us often move from the New York area or elsewhere. We reach out to their families and do what we can to help them feel welcome, so we're family oriented. Another side of our culture is our interest in Johns Hopkins University here in Baltimore. It's a great place to incubate research projects. We're sponsoring graduate students in financial engineering and mathematics. Staying current with research is our priority, even as we foster out friendly traditional culture.

OFI: What are the prospects for managed futures in current markets?
TB: This is an environment that creates trends. And let's face it, most of us are following trends, one way or another, although the way we generate signals varies. September and so far October were very good months for us.

OFI: Are institutional investors showing interest?
TB: Last year was very hard on funds of funds. We are approaching endowments and pensions directly and find them open to managed futures. We have an international client base and we've become more active in Asia.

OFI: Will retail investors go for managed futures?
TB: The retail market now has a number of managed futures funds and we're very happy to be in that market. There is a lot of diversity among the funds, offering investors choices. People can get tremendous diversification benefits from managed futures. Campbell programs have a low correlation not only with the S&P 500 – as almost all CTAs do – but also with other managed futures funds. People are starting to take their money out from underneath the proverbial mattress, they don't want to be too exposed to stocks and they need to put the money somewhere. Managed futures has what investors want. We offer transparency and liquidity.

"Capacity constraints were always on our mind. When I joined, people thought we couldn't grow beyond $300 million! Then we got to the first billion dollars with no sign that the trades were suffering."

This article was published in Opalesque Futures Intelligence.
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