Tue, Jul 26, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Manager Profile Lafayette Trading had a nice gain in H1 2009, while CTAs as whole are in the red. How did Lafayette do it?

Tuesday, August 11, 2009

Sweet Spot Timing

The political and regulatory controversy around high-frequency trading highlights the question of trade timing. Some commodity trading advisors use multiple time frames. Others find that their approach works best within a certain period. That is the case for Lafayette Trading, a CTA based in eponymous Lafayette, California. Managing director Ken Jones explains how they look at this pivotal question.

Mr. Jones has been in the alternatives space since the mid-1980s. He worked for a $1 billion global macro fund in California, Synergy (CRG) Partners. There he met his current business partners, Todd Lorber and Ken Whitley.

Building on a trading system that Mr. Whitley developed and licensed beginning in November 2001, the partners launched trading for accounts managed by Lafayette in October 2008.

So far, the group appears to have found the right time horizon. The CTA was up about 10% year-to-date as of July. The system has generated 14.3% annualized compounded returns since 2001, deducting pro-forma fees.

Ken Jones of Lafayette Trading:
We are short term active traders, not high frequency traders. We don't trade every minute, but every day we re-evaluate the market, looking for new opportunities. So we have the potential to trade every day, but we risk capital only when the right opportunity shows up. Typically of 20 trading days a month we have trades on 10 days; the other 10 days we're in cash.

We trade equity markets using index futures. We are doing research into other markets and could extend our focus but our portfolio's track record was built trading equity indexes. That's where we have an edge, so we've chosen to stay focused on that overlaying the same program on additional types of contracts does not seem useful.

As luck would have it, we started Lafayette's proprietary account trading in October 2008, at the height of the financial crisis. That first month was difficult, with equities going straight down. We lost about 5% that month but recovered later in the year and were able to make money.

Last year we did not have as high returns as trend followers, but for an investor our distinctive strategy provides portfolio diversification.

We've done well this year thanks to our strategy and system. Because we're not a trend follower, the lack of long-term trends has not been a problem.

I think a big part of our advantage is the fact that we're more frequently engaged in the market but our system is set up not to be engaged when the conditions are not right. If our program finds a situation where it has a statistical edge, it allocates capital that day. Otherwise we stay in cash.

Our algorithms are proprietary and unique to our strategy. We're always doing research, including research into diversifying with a separate investable European and Asian equity index portfolio, but the core program does not change much. Early this year we added one new algorithm that reflects a different way of looking at the market, but it did not make a significant change to the portfolio.



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: California-based manager launches long/short equity hedge fund with unique algorithm[more]

    Benedicte Gravrand, Opalesque London for New Managers: SJL Capital LLC, an investment advisory firm based in California, has launched its maiden fund, the SJL MarketDNA Hedge Fund LP. The fund, which began trading

  2. Manny Roman to move from Man to Pimco[more]

    Benedicte Gravrand, Opalesque London: Emmanuel (Manny) Roman, an investment world veteran, has been hired by PIMCO, the large US bond fund house, as chief executive officer. PIMCO's current CEO Douglas Hodge will assume a new role as managing director and senior advisor when Roman joins P

  3. HFR: Hedge funds post strong gains in mid-July as markets recover from Brexit losses[more]

    Komfie Manalo, Opalesque Asia: Hedge funds posted strong gains through mid-July as the equity markets continued the recovery from Brexit losses. The HFRX Market Directional Index gained +2.17% (+4.22% YTD) and the HFRX Global Hedge Fund Index gained +1.03% through mid-month (+0.19%

  4. News Briefs - Carlyle goes on trial for a financial-crisis meltdown, Private equity and venture capital outperformed public markets in 2015, Pippa Middleton gets engaged to hedge fund manager James Matthews[more]

    Carlyle goes on trial for a financial-crisis meltdown Carlyle Group co-founder Bill Conway was in court on this small island last week recounting one of the most bruising episodes in his private-equity firm’s history: the 2008 collapse of mortgage-bond fund Carlyle Capital Corp. Carlyle

  5. …And Finally - Two men fall off cliff playing Pokemon Go[more]

    From BizarreNews.com: Two men who fell from a seaside cliff north of San Diego told authorities they became distracted while playing augmented reality game Pokemon Go. Encinitas fire Battalion Chief Robbie Ford said one of the men fell about 50 feet down the bluff in Encinitas while the other man fe