Ep. 1345: Jerry Parker and Moritz Seibert with Michael Covel on Trend Following Radio

My guests today are Jerry Parker and Moritz Seibert. Jerry Parker, the founder of Chesapeake Capital Corporation, a global investment manager headquartered in Richmond, Virginia, in 1988. He was an original TurtleTrader, the most successful TurtleTrader. Moritz Seibert, Founder & CEO at Takahē Capital, a systematic investment manager targeting absolute returns through resilient trading strategies. He is also the co-host at Top Traders Unplugged. The topic is Trend Following. In this episode of Trend Following Radio we discuss: Risk and drawdown expectations in trend following Systematic v. discretionary Leverage in CTA performance Performance fees, clawbacks, and client alignment CTA, managed futures, and their marketing implications Jump in! --- I’m MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I’m proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show. To start? I’d like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/ You can watch a free video here: https://www.trendfollowing.com/video/ Can’t get enough of this episode? You can choose from my thousand plus episodes here: https://www.trendfollowing.com/podcast My social media platforms: Twitter: @covel Facebook: @trendfollowing LinkedIn: @covel Instagram: @mikecovel Hope you enjoy my never-ending podcast conversation!

• 0:00Speaker 00

  This week on the podcast, an interview, me with two trend following traders, Jerry Parker of the Turtle Trader fame and Moritz Seibert. Both very wise trend following voices. And generally, we all agree on almost everything. Except there are a few interesting points of contention. I hope you enjoy this trend following deep dive.

• 0:41Speaker 00

  So listen, guys, I don't really have a plan, but I think for the audience, I should at least set this up. I'm just sitting here running my normal life, whatever that is. And I get a text message from a guy, Jerry Parker, a guy who happens to be on the screen now. And Jerry says he wants to have a fight about something and it could be interesting. He wants to take on Mia Moritz and I don't necessarily understand the fight yet, but here we are. Jerry, we were just talking before we got on air. What is the feeling of where you are right now in America? Give the audience a feeling from the Jerry Parker perspective.

• 1:16Speaker 01

  What happened in 2016 is Trump won, but you were not going to admit that you ever supported him or voted for him over those four years. It was embarrassment. Then when he got elected this last time, the big sea change was that he won the popular vote and Senate and House. So that was totally unexpected. And so then everything changed. The Democrats gave up, the country changed a bit. People on the fence about wokeism, the US being a good place and the borders and stuff. It was just all now one sided and everyone knew now what the truth was. Biden should not have had open borders and wokeism is out of control and America's okay. It's an okay place to be and Americans are okay. We don't have to hate our country.

• 2:00Speaker 01

  Everybody who still has those feelings, I think, feel like they're in such the minority. And so I think that's the big change in America is that now people are sort of not afraid to be pro-Trump's policies, you know, measured way, but he still embarrasses people. When I was over in Switzerland skiing a few months ago, and as soon as we get ready to get on the lift in Samaritz, a guy comes up to my wife and says, you're Americans, you're horrible, we don't want you here. So we're like. And nothing ever happens for the rest of the trip. And I predicted that nothing will happen. And people were shocked that it even happened. And so what? One person doesn't mean anything. But then we did a hike somewhere and then another person said, what do you think of your president? And I said, he makes me nervous. And I think that's what everybody feels like.

• 2:45Speaker 01

  We like some of the policies, but he makes everyone nervous. But I do think that it's in a new age now where standing up for more common sense is perfectly fine. And we're not on the defensive any longer. But still you have to put up with Trump's silliness. And of course, me, the tariff thing hurt my performance dramatically. I certainly wasn't in favor of that. I'm always more loyal to my clients and my performance than I am any politician. But yeah, America's fine and we love Canada.

• 3:16Speaker 00

  Moritz, send me the European update. You can feel free to comment on anything Jerry said as well.

• 3:21Speaker 02

  I'm sure about all of the Europeans, but a lot of Europeans, I think they don't like the erraticness and unpredictability of Trump, be that Greenland or the Gulf of America. You name it. I mean, there is something new every other day. And some of these things are a little bit silly. Some of them may make sense. I don't know. The facts are a lot of Europeans stopped going to the US. I think you can see in the flight data, there is less people coming over. Maybe they're a little bit concerned about immigration. If you have something on your Twitter and it makes fun of the president, maybe they won't let you in or they keep you there forever. So it has been easier before, put it that way, to like the US.

• 4:03Speaker 02

  And if you two know, I used to live in the US and I really love the country. At the moment, it's a little bit of a stranger place. Maybe that will change again in a couple of years. Who knows? But we've got our own amount of problems here in Europe. There's no finger pointing as far as I'm concerned.

• 4:19Speaker 00

  It's funny is if we take those two backdrops and we think about what we're ultimately going to agree mostly about today is that these kinds of backdrops, regardless of the year, the decade, the century. There's going to always be chaos. There's always going to be dislocations. There's going to be trends. Everything's going to be unexpected. We can't predict the damn thing. We can sit here, the three of us, and we can give our fundamental perspective and our opinions on what's going on. But at the end of the day, I don't know. Does anybody on this call want to trade that way?

• 4:47Speaker 02

  Certainly not. And we don't. But I'm looking forward to this boxing fight that we're going to have. I'm completely anti-terrorist. Didn't bring any gloves. I'm not sure what we're going to be fighting about.

• 4:58Speaker 01

  No fight. I'll just set up my thought. We did the Aussie podcast, Moritz and I, with Richard and Adam. And then Moritz brought up a couple of good topics. And I was like, oh, we need to have another podcast to discuss ETA leverage and then also incentive fees and performance fees. And so then you guys had a great podcast, which I thoroughly enjoyed and watched it more than once. And you brought up these same issues. And so why wait around for the Aussie guys? Let's see if we can get Covel to host this debate versus two people who agree on almost everything. I think my opinion on all of this is more middle of the road on performance fees are not perfect, not a panacea. High leverage, come on. I came from the king of high leverage. I lost 60% in one day.

• 5:43Speaker 01

  And we're averaging 200% a year. So I don't think that's a panacea either. And there's just this extreme leverage that will knock you out of business. And there's higher leverage than managed futures CTAs. To me, it's just a pros and cons list more so than a fight.

• 5:58Speaker 00

  Jerry, let me take you back to, let's say, early 90s when you're really getting rolling with Chesapeake. And correct my memory if I'm a little off, but I think I'm right. That one of the things that you did early on was drop the vol sum and to make it a more palatable product for, let's say, most people that don't want to lose, as you just mentioned, 60% in a day. But you were on that train very early in the 90s. Yeah?

• 6:23Speaker 01

  Like I said, coming out of the Turtles where we made 200% four years in a row. Obviously toning it down to try to shoot for 20%. Really not that much of a tone down in the real life when you're trying to raise assets to keep clients around. And right out of the gate, I was given 2 million February 1988. And I was down 20% almost instantly. And then that went to 300,000. And so right out of the gate with the big drawdown, I lost all that money. And shooting for 20% is pretty aggressive. Moritz hasn't exactly stated anything like that. If it's 20 or 30 or 40 or whatever you guys are aiming for. But this comes with business risk and trying to find good clients who tell you upfront, you know, oh yeah, I can handle these drawdowns.

• 7:06Speaker 01

  It's always a risk with these clients and what they're going to be able to handle.

• 7:09Speaker 00

  They don't know what it is until it truly hits.

• 7:12Speaker 01

  Yeah, I was trying to say this last point for the recording. And my understanding and experience, you can make 200% a year, even if you're willing to do the 50, 60% drawdowns with much shorter term systems. Now the CTAs, almost all of them with large assets are much longer term. And the ability to make hundreds of percent now with a longer term strategy is much more limited than it used to be. And coming out of the turtle program, I still had that same short term turtle system, 20 days in, 10 days out, 40 days in, 20 days out. I think Moritz and I have actually said this to each other. Our research shows that the max drawdown will average twice the annual return. So if you're shooting for 20, you're going to have a drawdown of 40 or more.

• 7:57Speaker 01

  Therein, right there is your limit. So we're not going to go back to hundreds of percent. Unless you do something other than classic trend following with massive cutback overlay, which then becomes not classic trend following.

• 8:12Speaker 00

  Moritz, is there anything Jerry has said so far that you would say, man, that guy Parker's nuts?

• 8:17Speaker 02

  No, I do agree with that. So just with the drawdown expectation, the worst theoretical drawdown could be 100% and then we're out of business.

• 8:24Speaker 01

  Yeah.

• 8:25Speaker 02

  We know that it's going to be two times the volatility or three times the volatility. It could be four times our volatility. That is just the big unknown. And the longer we trade, the more likely it will be that at some point we will hit that very deep drawdown. And to your point of accepting these drawdowns, it's very easy to look at a performance chart, especially a long-term performance chart such as yours, where you have a very long-term track record. When you look at this, hundreds of months and you zoom out, the drawdowns are barely visible anymore. You're making a new equity high at some point and it looks very nice. But when you're in the middle of it and you get into the 20, 30, maybe 40, 50% drawdowns, and you've mentioned you had a 60% one.

• 9:07Speaker 02

  They feel extremely nasty, extremely inconvenient. And that's why we believe it's so important to have a conversation with every single one of our clients before we allow them to invest in our fund. It is a requirement. Nobody is allowed to invest their money with us if we don't have a personal chat with them. And that's exactly about this. It's about, hey, we're going to be taking some risk, not in a uncontrolled way, not in a irresponsible way, in the way that we trend following traders do take risk. Small losses, hopefully, large winner. There can be instances where getting into very large drawdown and you need to be ready for this. You need to be dealing yourself for this right now.

• 9:49Speaker 02

  Because if you're pulling out, if you're closing your investment at that point in time because it hurts, because it creates pain, by the way, this is why you're paying up a fee to do this for you because it's so hard, then you'll have a very bad investment experience. And we want to check that people have that mindset and they can follow through on this, that they have some experience with that. It's very liberating for us that one set of clients immediately drops out of it. And these are the large institutional allocators, because when you speak to them about a forty percent drawdown, they're off. They're like, this doesn't exist in their shop or a certain world. They can't handle that. They're definitely not our clients, which, by the way, is good for us.

• 10:32Speaker 02

  Well, we find people that want to make or at least have the ability, the chance to make a lot of money, which is important to us. Then, yeah, invest with us, but be aware of these drawdowns. Final point, because Jerry mentioned something that we do not do, and I don't think Jerry is doing, which is this drawdown response function or drawdown control. You get into a forty percent drawdown, you get into a fifty percent drawdown. You have these fighting forces against each other. One is the risk of ruin. Yes, you're trading futures contracts, you're using leverage, you definitely do not want to go out of business. But if you reduce your position size too much at that level of drawdown, it just impairs your chances getting out of that drawdown or making that recovery function,

• 11:16Speaker 02

  that recovery path very long. And that's also inconvenient. As I said, it's the depth of the drawdown, it's also the length of the drawdown. The length of the drawdown can be more inconvenient than the depth of the drawdown. So it's also important that it's not lasting too long. We have an issue with sample size when it comes to the historical response functions. Because when you look at your stark return stream, you'll find it very easy to cherry pick the two or three drawdowns that you think were the most inconvenient, the longest or the sharpest, the deepest, whatever, the quickest. You then come up with a rule that says, okay, if I'm in this drawdown of X, then I'll be reducing my positions by an amount of Y.

• 11:56Speaker 02

  And you do this and it smoothens your historical return curve, increases the shop ratio, increases the ratio, those all that type of stuff. But you've had three or four occasions where you could have done this. So you're essentially optimized and fitting to a sample size of four, which is just nothing that you should do. So we throw this out of the window and we want to live and die by this sort of position sizing appropriately at the time of entry, having an initial stop loss and therefore in a controlled and ex ante defined amount of risk per trade, which is an equal amount of risk per trade per market, whether it's long or short. And it's a certain number versus a certain amount of our bankroll.

• 12:40Speaker 02

  If it doesn't work, okay, fine. We don't mind it too much. Hopefully it doesn't go on and on and in too much of a sequence. But these are the small losses. That is our best way of controlling the risk is keeping these losses small. And eventually you get that big winner.

• 12:54Speaker 00

  There's a couple of issues here that Jerry brought up that I want to get into. But I want to bring something up that you both have brought up so far. Trump tariffs last few months and not good for trend following business. Why don't you explain to the audience, Jerry, welcome to go first. Explain to the audience your perspective on watching market behavior during a time where a president seems to be just pulling on a string one day this way, pulling on a string the next day that way. And if you can, or if you've got a memory of prior time to compare the last few months to.

• 13:32Speaker 01

  I can definitely think of worst times and that is way more extreme than this. The nineties, the Bank of England raised rates in the morning and cut them in the afternoon or vice versa. You can just imagine the currencies and the British pound going crazy. So I just think as a trend follower, systematic CTA, believing in systems, you put all of this silliness and craziness of the world, chaos, war, weather, politicians, government in the same basket, which is we just got to navigate around this stuff. It's impacting us positively or negatively. It doesn't make any sense at all to categorize it. Oh, it's a Trump thing or it's a president or government thing. No, it's all of that crap that's going on that's helping us a lot or hurting us a lot. It's just stuff we need to navigate through because that's what trend following, we're advertising it's supposed to do.

• 14:17Speaker 01

  It's supposed to be the best thing at this uncertain times and crazy times. Let's just do our systems. And I think after a couple of days of that, I was just looking around at all the damage and thinking, what are we going to do next? And then we have just a process in place. We have the computer guys generating the trades each day, the traders doing the trades. I'm just sitting there watching and I just said to myself, okay, I guess we're not going to do anything. We're just going to keep doing the systems like we always did. And so I was a little shocked by all this. I've just been thinking over the past few years that the greatest approach in trading is just to farm everything out to other people. That's their job to come up with the trades each day based upon the systems and the computer. The traders do the trades and Moritz and I just sit back and said, this is what we're going to do. We're committed to doing it.

• 15:02Speaker 01

  We're out of the loop. We have the power to override it. It'd be undisciplined, but we got to put in place ways that don't make that likely.

• 15:10Speaker 00

  Jerry, back in the day, back in the 90s especially, I remember it was quite popular for trend following traders to list in their disclosure documents that they would be 95% systematic and 5% discretion. Speak to this idea of discretion as a trend following trader and speak to your view on discretion, if and when that's even been part of your approach any time recently.

• 15:33Speaker 01

  Discretion is probably something that's unnecessary. Let's say from my point of view, that specific word. But I do think deviating from the systems is you can put into your document or put into your systematic approach, when you're going to deviate from the system, so it's no longer discretionary, it's deviating from the system rules. And I heard everything Moritz was saying and I agreed with everything, although I do think there could come a time, which I think I want to make as infrequent and as unlikely as possible, that you do have to worry about risk of ruin and you do have to reduce your positions. And I think that's the one turtle rule. That was the giant of all the rules and it was the greatest rule of all time. And that is have a plan in place where you're going to feel like you're going to reduce

• 16:16Speaker 01

  the positions materially across the board to reduce your risk of further harmful drawdown. What's great about this cutback rule is that it allows you to go right back doing the systems. If that's what you want to do, you don't want to do discretionary, I'm going to take some trades, not take some trades, get out of some trades that are screaming and making money, get out of staying others that are not making money or vice versa. So if you use the cutback rule that allows you to continue to follow your systematic approach and follow your rules, that's great. Now, that is something that's definitely necessary when you're trying to make 200% to make those cutbacks. And so when you try to make 15 or 20%, that's a big step forward of not having to use the cutback rule.

• 16:57Speaker 01

  And I don't know if you remember this guy, Jazz Liberty, but he was a trend following guy on the internet back in the early 2000s. And he did a research project that he published, what would have happened to the turtles if they would have just traded smaller without the cutback rule? They would have made more money, was his conclusion. And so absolutely, you can't make more money. By using discretion or overriding the rules, even if it's money management survival rule, you've never expected that's going to help you. It's just going to help you stay in business. And over the years, before I got to a certain amount of leverage and risk, where it was a very low probability that I would have to use the cutback rule,

• 17:39Speaker 01

  whenever I did use it, it was inevitably at the very bottom. So you're cutting back at the very worst time. And like Moritz said earlier, you don't want to have to do that. But I'm just saying, it's possible that you're going to decide one of these days that you should do it. Anyone, regardless of your high leverage, low leverage, whatever.

• 17:57Speaker 00

  Moritz, if we steer clear of the word discretion, speak to your thought process about deviation from a system. My understanding is you're 100% systematic, so I don't know that there would be deviation.

• 18:11Speaker 02

  If you're 5% discretion, it's like you're 100% discretion, because these 5% discretionary trades throw the research that you've done on the system out of the window. We've committed a lot of our time developing these systems, and we like them. We like their bad sides and their good sides, and we'd like to stay with them. That's the big thing about being systematic and staying systematic. You just have to follow these systems to crystallize their edge. And every system has the day in the sun and the day in the rain. And this is also a difficult period sometimes to then not change your system, because you're more tempted to make changes to your system when you are in a drawdown, when it's not working so well, or when you are underperforming peers, when somebody else is doing better

• 18:55Speaker 02

  than you, your neighbor is doing better than you. That is, this gives you that impulse of, I'm underperforming, I'm taking it personally, it's on me, which is not true. And then you're trying to change your system. You have to give these systems time. I do agree with Jerry, that it's important to take every single trade and follow every single signal. And there could be this conflict of you're too much of a drawdown. Where that is maybe no longer possible. So yes, I do agree in our documents, we say that we're systematic and we are. The things that are discretionary and driven by a human and not by an AI overlord is the evolution of our systems.

• 19:36Speaker 02

  If we come up with a new idea, if we come up with an improvement, which in our case is a super slow moving, kind of like tomato sauce, whatever. It's not happening every week. It's not happening every year. Very slow moving train tanker. I'm not ruling out that if something that neither of us wants to think about, whatever, like it's nuclear war, but something massively big geopolitically big, where kind of like markets are in massive turbulence. I'm not ruling out that we would be cutting back risk and that would be discretionary decisions at that point in time. We'd be naive to say that, hey, come hello high water, we'll be going all in with our trades, even if we're hitting the wall.

• 20:21Speaker 02

  That would be unresponsible, irresponsible. Yeah, but ninety nine point nine percent of the time, and hopefully maybe one hundred percent of the time in our lives, we won't have to do that. We just can rule it out forever. One thing I'd like to mention is with the recent liberation day sell off that we've had, a lot of trend following traders went into deep drawdown, some into their deepest ever drawdown. When you look at what happened is most people, they immediately focus on S and P five hundred. Here is another V. It's the same type of COVID V that we've seen five years ago. We didn't actually lose most of our money or give back in the S and P five hundred or the equities. I think it was some of the currency and the JGB that hit us even harder than the equities.

• 21:07Speaker 02

  But in response to what you've observed, and this is the recency bias, oh, I still remember this V, the COVID V from five years ago, and now we have one that's almost identical. Should we not assume that there is going to be more Vs? Because people buy the F thing dip. It's kind of like you have this new retail route out there that just go on zero DTEs and they buy everything, the gamification of trading, the fat put, whatever it is, like equity markets always have this quick recovery. And then Man Group, Man IGL, they came out with a great analysis around this, saying, look, if you think that we have now more Vs than we did in the past, you're wrong.

• 21:51Speaker 02

  We've had a lot of Vs in all sorts of markets, not just in equities, over the past 100 years. And what we're seeing today is not a statistical anomaly, it's just part of the data set. No reason at all to make changes to your system so that your system has a better response function to future Vs, because you're monkey brain falling into the recency bias trap. So don't do that.

• 22:15Speaker 00

  So Moritz, we're sitting here with the three of us diving into trend following, essentially, like the three of us like to do. But one of the people on this call really loves this government term called CTA, commodity trading advisor. I can't take back my thoughts on it. I think it's always been confusing because the strategy, from my perspective, has always been the primary strategy of commodity trading advisors, those people regulated by the Commodity Futures Trading Commission, has been for many, many decades, trend following. And then I think sometimes what happens, at least from my perspective, is traders that are not trend followers glom onto the trend following wave a little bit. Jerry, you're fond of saying trend following plus nothing, but I've always been fond of the phrase trend following versus some of the regulatory terms.

• 23:00Speaker 00

  Moritz, I'll let you jump in and then we'll let Jerry bring up the rebuttal. Do you like the term?

• 23:04Speaker 02

  It's easy to use, it's easy on your tongue. We shouldn't use it, to be quite honest. We do trade commodities, we are not even a CTA. We are registering as a CPO, we're a commodity pool operator. We're also regulated in Europe where the CTA term doesn't exist. It just became synonymous with trend following trading, which is just no longer true. It's just easy on your tongue. Just call us systematic.

• 23:29Speaker 02

  Diversified trend following traders, I think, or systematic trend traders, if you want it short of term. And I think that's it. That's what we do. And then you have all sorts of other people that trade quantitatively. Short-term mean reversion, swing traders, auction traders, all sorts of different styles. As far as we're concerned, it's systematic trend following or systematic trend trading.

• 23:52Speaker 00

  You don't disagree with that, do you, Jerry?

• 23:54Speaker 01

  No, no one loves trend following that word more than me. I have a tendency to use CTA trend following. So people can know with greater clarity what we're talking about here, because I think there's other kinds of trend following. I was mainly focusing on CTA, not versus trend following, versus managed futures. We're all probably in agreement there. I don't like the word managed futures. I will say that to some degree, it's a marketing thing, you know, I think you've been hitting on that. But it's just like IBM. IBM doesn't make business machines anymore. But they're not going to get rid of that name because everyone knows what IBM means and stands for. And in the same way, yeah, we don't trade commodities exclusively, but it's got great heritage, a great history. And it's a funny name and people know exactly what we're talking about.

• 24:39Speaker 01

  And that's the key to having a good name. Hey, it's a bird that won't go out of existence. I love that people know who those guys are, or it's this old fashioned term that warms my heart to some degree. I don't want to see it go away, but I definitely think the optimal is to combine it with trend following. But nothing beats trend following. You know, I try to advocate, let's stop using this word managed futures. But now I like managed futures because what managed futures signals is CTAs who don't use classic trend following. It's 99% of the industry that cuts profits short and tries to smooth out performance. I frequently say CTA trend following or managed futures CTAs to make fun of them. And I even coined the term mismanaged futures, which drives people crazy just as a joke.

• 25:23Speaker 01

  Because I think it's good to delineate between the two different strategies. Are you doing classic or letting profits run, taking small losses, sticking to your systems, allowing for drawdowns? Or are you trend following and trying to get rid of the bad parts of trend following? Smooth it all out and even add in other strategies that smooth out trend following. You know, we're the only hedge fund category that tries to hedge out itself. And they grovel for two or three percent of a portfolio and sell themselves as crisis alpha. It's almost like a Stockholm syndrome situation. They're siding with their captors. Please, will you give us a few percent? And we'll create and change our systems and to suit you. We need to be shorter term to catch the S and P downtrend quicker.

• 26:07Speaker 01

  We'll consider doing that and we'll absolutely consider cutting profit short in order to smooth out the returns, make it less skewed, less relied upon outliers.

• 26:17Speaker 00

  In a perfect world, Jerry, if there was no industry branding, regulatory branding of CTA or managed futures. I don't know who developed those terms, but in a perfect world, you would never choose those terms. Right? We're kind of stuck with them.

• 26:33Speaker 01

  Once again, I think the key to any name is being able to identify what these people do. And it's a shorthand. If you can get to being known as IBM or CTA or Google, and people immediately know what that means in their head, that's a good marketing thing. So I think being CTAs is fine, but I love trend following too. But there's no category in the world that's going to prevent people from sneaking into the category and not doing things the way you would want them to do, or the majority of people do, and prove there aren't going to be CTAs who don't trend follow. That's why I call for more description, but I want to get back to the leverage issue, if you don't mind.

• 27:10Speaker 00

  Of course, jump in.

• 27:11Speaker 01

  When I was listening to the podcast with you two guys, I was getting a little confused because I think at some points you were talking about different things. One was the overall leverage and expected return from a CTA program. Are you going to try to make 10% or 30%? The other one was, are we going to smooth out performance? With the volatility management, correlation management, cutting profits short, bragging that you're selling cocoa in January of 2024 as it's skyrocketing up. We're selling cocoa every day. They were bragging about that, about this risk control because cocoa was too volatile. I'm really anti-ball targeting and correlation management and volatility management and dynamic position sizing.

• 27:55Speaker 01

  I want to advocate for letting profits run freely and accepting the volatility and the drawdown in a responsible way where you're still preserving capital. That's where I kind of draw the line. But what drives me crazy is over the years, I've had to deal with this question, and that is that people assume, non-traders mostly, that you should choose systems primarily based upon can you do the system? If you mentally can't handle drawdowns and volatility, then you should change the way you trade. And my comeback is no, you should use the math to decide what's the best way to trade and force yourself to learn how to do the right thing, or don't be a trader. And I think that's the two issues. Not with Richard Dennis, the whole point was to choose methods that are hard to do

• 28:39Speaker 01

  and that are painful. This is what the market and the backtesting is saying. If you want to take money out of the market, you can't do it on your own terms. You have to do it in a way that's counterintuitive to what humans like. Okay, with that said, though, I will carve out this one exception because you had said on the podcast, is it still trend following if you're not trying to make lots of money? It's certainly not trend following if you're trying to smooth out the performance in a non-robust way that I've already described. But I will carve out this one exception. If people are following a classic approach, letting profits run, making losses short, but they just don't have the nerve or the ability to make 50% a year with those encompassing drawdowns. And I will say that's totally fine. That's still trend following.

• 29:23Speaker 01

  It's not Richard Dennis at 200% or the other people that you mentioned on the podcast, the greats of the industry. But it still is classic trend. And some people can handle the 30, 40% returns and drawdowns, and some people can't. And so I think, let's give those people a pass. I'm in the middle somewhere, but I do think that you do need to control this ball in your risk level, especially since it's going to have a big negative impact on your ability to follow the system if you get over your skis and start trading too large, not even withstanding the fact if you trade too large, you may blow up.

• 30:01Speaker 00

  Let me give it to Moritz. Moritz, I don't see anything wrong with the idea that if someone fully analyzes the trend following world and systems and they say to themselves, you know what? I don't want to be shooting for these super high returns and much larger drawdowns, but I'm willing to take far less return and hopefully less drawdown. I mean, I've written about that. I've never seen anything wrong with that. It's a clear choice, though. Like, right, Jerry, you had this fantastic situation as a very young man, where you're like, oh, my God, I'm in this situation where the number one goal is to get rich as what? It's a trade-off here, right? You know, young people especially are going to say, damn, I want to be Jerry Parker as the Turtles, where they might be saying, you know what? Okay, when I get to be Jerry's age now, I'll drop the leverage back a little. I'll shoot for less return.

• 30:44Speaker 00

  I won't be willing to lose as much money. So I think this yin and yang is always there, isn't it?

• 30:49Speaker 02

  It is. I mean, there is no trend following release out there that will put people in jail if they don't go for 20, 25, 30% volatility. So they can choose what they want. Over time, what we have experienced and the data is very clear on this, that most people do prefer trend following in the eight to, say, 12, maybe 15% volatility risk. This is where the big tickets are being written. This is the institutional allocator space. These are usually people that have trend following as part of a very diversified portfolio. They're shop ratio focused. They have all sorts of statistics in their heads and they make an allocation to one of the big brand names.

• 31:29Speaker 02

  Our clients, by the way, I'm clearly not mentioning names, but if we do a cross-section through our client, they're between 30 and, shall we say, 40 on average. So I would say younger, certainly the exception.

• 31:42Speaker 00

  Millennial.

• 31:43Speaker 02

  Yes, younger than me, some of them, many of them. And why is this? I think it's because they want to have a chance of making a good amount of money and they don't care about the shop ratio as much as all the pros do. And I explain them, or we try to illustrate, that is, I think, the right thing to do. And I'm not putting this in air quotes because our way of trading just shows very clearly that volatility is not risk. Volatility is the byproduct of the positions that we're putting on. And Jerry was just mentioning cocoa. The shop ratio does not like cocoa. The shop ratio hates it when cocoa goes from seven thousand to twelve thousand.

• 32:26Speaker 02

  But my bank account loves it when cocoa goes from seven thousand to twelve thousand because we're long. So clearly volatility is not risk. Volatility is the byproduct of this very great trade, which has become a massive opportunity for us to make money. We measure risk in a different way. We don't measure risk by calculating the volatility and controlling everything in accordance to a volatility target. We measure risk as a, what is the risk of us losing money? How much money do we lose if we hit the stop? That type of stuff, even simpler than calculating a standard deviation, very simple math.

• 33:07Speaker 02

  But the volatility of our trading, of our return, most of that, three quarters of it, is from big open trade profits, from nice trades where we enjoy the volatility, where it's positive volatility. And the stuff that drops to the floor, the trades that don't work, they don't even have a lot of chance to contribute to the volatility. Because before they do, we just, you know, kick them out of the portfolio. So these volatility calculations just don't think, they don't think at all with a trend following rate style that is asymmetric.

• 33:43Speaker 01

  I couldn't agree more. Mauritina, we're in total agreement on this. Volatility is not risk, but I think the next generation needs to defeat sharp intellectually. It's not enough just to talk about sharp. We have to come up with a better measurement. We start off at a good place because the reason to use sharp is because it's readily available. You can pick it up from the performance tables. We can do much better than that. And our clients and others can see it with a deep dive into the performance of classic trend. Why intellectually and mathematically sharp? And once we defeat sharp, it'll be a whole new ballgame. You did make me laugh because this weekend we had a couple of parades. One was a military parade, Trump's birthday with the weapons and the tanks and the military.

• 34:27Speaker 01

  And then one was a no kings protest parade. People protesting against Trump and holding up signs that said, no kings. And yes, we needed no kings for trend following. No fascists, no kings, nobody's going to crown define what trend following is for everybody. But that's why it's so much fun because we're in a good situation where we can win that debate over time, even though we're in a small minority now.

• 34:52Speaker 00

  Let me keep it at this idea of defeating sharp. I think Moritz was doing a decent job there of outlining, hey, you know, we've got these open trades and it's a little volatile. Hey, that's great if it's going our way. And then on the downside, we're cutting short. Jerry, sharp is, let's be frank, sharp is a formula. It's industry jargon and even for people in the industry, they'd have to go think about what it is exactly. So how would you defeat sharp? That sounds a little jargony in itself. With all that decades of experience in the trend following space, why don't you break it apart a little bit about how you might imagine defeating it?

• 35:27Speaker 01

  Well, I think you'd have to dig down deep into the way you put together your system and show people how Moritz and I put together the risk management system and the risk budgets and why we think that's the case. Back when Niels did his podcast a couple of years ago during the summer with the 20 CTAs who were in the SocGen CTA index, he asked them all the same questions. And one of the questions was, what do you think about sharp? And 19 out of the 20 said it's crap. Yeah, sharp is not right for non-normal distribution. Only one defended sharp in these podcasts, but then the industry goes on and on to placate sharp and to say, of course, we increased the sharp ratio. What we do increases the sharp ratio. And they throw it out there insinuating that, yeah, it's something we have to pay attention to.

• 36:11Speaker 01

  Yeah, we have to pay attention to it because once again, you have Stockholm syndrome. Whatever your captives are telling you, you have to go along with it. You have to deal with it and not stand up and say, no, we're not going to put up with this. It's not true. Please give me money. I'll try to do all the right things. But I'm going to intellectually stand up and say, no, for non-normal distribution, you can't use sharp. Use chat G P T. It'll tell you that all day long. And yet we can't get away from people bowing down to sharp. But it needs to be done in a math way and an intellectual way for better measurement and dig. The numbers that you use cannot just be from the performance table. Sharp is, that's for accountants to use. It's not for clients and for systematic traders who have access to computers who can dig down deep.

• 36:51Speaker 01

  But it gets back to a lot of the difference between classic trend and managed futures C T A trend following.

• 36:58Speaker 00

  Let me take it back to something, Jerry. You brought up some of the early returns in your early career. It's got to make you feel nice, though, that if some young person knocks on your door or something and they're inspired by Jerry Parker in his twenties, shooting for the moon. There's got to be a side of you that's got to feel nice in a way. I mean, what do you do when that young person shows up and wants to shoot for the moon like Jerry in his twenties? Do you try to not push them in that direction? Do you try to stop them? What kind of feedback do you give to people when they're inspired by your early career and wanting to gather crazy wealth early? You are in a unique situation, so we all have to admit that.

• 37:34Speaker 01

  I would repeat what I've already said and what Moritz has already said. If you have the personality and the clients to shoot for higher returns, you should go for it. You must be careful not to get, go too crazy. You can't go back to making 200% with long-term trend following. If they tell me I can do short-term trend following like you do, I know how to do it better. I would just say, good luck. Who else is doing that? But that's the holy ground. You should trade as short a term as you possibly can with the leverage that you can handle.

• 38:03Speaker 00

  To clarify, too, when you say trade as short a term as possible, you're not sitting here saying, hey, go do 15-minute bars and one-hour bars. That's a whole different game.

• 38:11Speaker 01

  Yeah, no, the backtesting research will determine what's possible and whether you should be doing that. You're reading all the time about people who are really in big trouble and who have the lessons that they learned, trade small and follow the trends. You can push it a little bit more if you're equipped to do that with a good system and a good mentality. I applaud Moritz for doing this. I think it's the way forward. I think this is a great business plan for people like him. Because the incentive fee, which hopefully we can get to, the incentive fee.

• 38:39Speaker 00

  Give me your perspective on the incentive fee.

• 38:42Speaker 02

  Before you go there, Jerry, I think some people would have final word on the sharp ratio. Some people would probably have withdrawals when you took the sharp ratio away.

• 38:48Speaker 01

  That's right.

• 38:51Speaker 02

  Ten to twenty years with a newer generation on the portfolio allocation controls. They understand that returns are non-normal distributed, that the world is non-normal, the world is crazy. And therefore, the shop ratio just doesn't make sense. I mean, one simple measure that's out there and everybody uses that as well, but it just doesn't get the recognition I think it deserves. Is the Mar ratio. Just take your compound average growth rate and divide it by the drawdown. No volatility calculations are needed. It's just, hey, this is how much money I can make compounded candlelight on an annual basis. And this is how much pain I've induced. That ratio to me, that's fine. I'm using it. I think that's a good one to use. I think it's better than the shop ratio.

• 39:36Speaker 02

  Any strategy or no strategy doesn't work. It doesn't work for selling options. It doesn't work for merger R. It doesn't, works for nothing.

• 39:44Speaker 01

  Bill Icard said the exact same thing in the eighties. The Mar is better. It's not perfect either. Once again, I applaud Moritz in his business choices of higher leverage and incentive fees, especially with hurdle rate, game changer there. Incentive fees with no hurdle rate, with the hurdle rate, oh, much different, much better. I'm an expert on incentive fees because I had no management fee and only incentive fee for many years, for twenty years with our largest client. And so it's pretty wonderful. Some clients prefer that and I think it's good to, in the marketplace, to meet those needs. We had a situation where, over the years, where we would offer clients incentive fee only, performance fee only, and management fee only. That's another route to go.

• 40:29Speaker 01

  And then my unsophisticated or not, they were sophisticated, they were high net worth, but they would say to me, which one should I choose? Should I choose management fee only or incentive fee only? And I was like, oh, if you think we're going to make money, you should definitely choose management fee. Because the math is, is management fee only. Because you'll pay the manager way too much money if you incentive fee hundreds and hundreds of basis points in a good year. And then, of course, I revisited with this client, the 20-year client Sovereign Wealth Fund, years after we stopped trading for them, and I was promoting this idea of incentive fee only, like we did with you guys. And one of the guys' response was, oh, we hate incentive fee only. It's the drawdown. It's the loss carryforward. As soon as we pay you a big drawdown,

• 41:11Speaker 01

  and we're CTAs in this situation right now, as soon as we pay you this big incentive fee, you go into this 20% drawdown, and we've overpaid you. And so that's another thing that kind of clients may not like. Now, I think if you have an incentive fee product, or incentive fee only, that with a clawback, oh, wow, you've really aligned yourself with the client there. If we go into these drawdowns, we're going to hold some back and not be paid the full incentive fee. Because on other podcasts, fixed fees, that's all we charge now because we only manage mutual funds and ETFs. They've been talked so bad about as you're not aligned with the client, even though we are the biggest client in some of these ETFs and mutual funds ourself. So we're right there with the client. You have no incentive to improve, to get better.

• 41:55Speaker 01

  All you're cared about is raising money if you're fixed fee only, which is all just totally nonsense. We're all so competitive and jealous of each other that we're so incentivized, regardless of how our fees are calculated, to do well, to raise money. Raising money is great for people. $1 raised for an incentive fee only plan is worth way more than a dollar raised for a fixed fee. So we're all incentivized, regardless of how we charge fees to get out there and raise money and improve. Of course, we always want to improve regardless of how our fee is calculated. It's whatever turns the client on. If you could do a little bit of both or offer both. Ultimately, if you want to go down the route of being aligned with the client,

• 42:36Speaker 01

  I'll be really impressed with some of these firms that don't even have a hurdle rate, have really high incentive fees, where the loss carryforward is maximized, the pain of that is maximized, and don't have this clawback provision. Had the clawback provision, I'll be really impressed.

• 42:53Speaker 02

  By the way, it also depends on the frequency of the performance re-crystallization. So some funds that have performance fees on a monthly basis.

• 43:01Speaker 01

  Yeah, ridiculous.

• 43:02Speaker 02

  I think the standard is like on a quarterly basis. The longer that crystallization period is, the better it is for the client. Imagine if somebody charges performance fee only every five years. Oh, yeah, that is much better for the client. But what is my view on this? I think the big allocators, they sometimes even told us, we don't have their money. We sometimes speak with them and they want funds to have a management fee because they say, hey, we're going to be putting up six months of work to diligence in you. We're sending over an ops team. We're doing this, that and the other thing, and then we're going to give you money and we want you to manage it for a very long period of time. And we don't want you to be stressed out financially as the performance doesn't come in as you expect.

• 43:44Speaker 02

  So you should really be charging management fees so you can make it through that period and invest in the business, keep hiring staff and all that type of stuff. Yeah, to an extent I can understand that. But these are not the clients. These are not our clients. Our clients are high in the growth of the Joel's family offices. The diligence that they need to do on us, if they do the big two diligence is usually remote. We're an open book. We have everything in the investor area. It's there. If we don't perform and if we don't like you, by the way, we traded liquid products. So you file a redemption, you get your money back. It's like a monthly thing. So what are you concerned about? With that as a backdrop, we decided that we should not be charging management fees. It was driven by two thoughts.

• 44:27Speaker 02

  One, there aren't that many funds out there that are incentive fee only. There's a few, but really we're the exception. So we're using this in a way also to position ourselves and the business, quite frankly, and proactively in a different way relative to peers. But also when you put more thought into it, or at least this is my opinion is when you're producing a return stream such as ours, which is diversifying, valuable, different. Sometimes it's anti-correlated to crises and not saying that we're producing crises alpha. It could be the thing that is the beacon of green when your portfolio is red, everything is in your portfolio. Let's call this alpha, whatever, there's different definitions of alpha.

• 45:12Speaker 02

  Okay, fine. But let's say we're producing an alpha-driven return stream. It's not beta. We're not putting together five hundred stocks in a basket and where market kept waiting it and we're putting an ETF rep around it. We're really. Producing something that is different. We're trading long and short. We're not necessarily keeping these positions for a long time. Get out of the portfolio. We're releasing risk. We're doing all these things. So with that, I think we deserve an incentive fee. This is a return stream that is produced because of our systems that we have developed. And I believe it is alpha. Maybe this commoditized in a way that, yeah, some of the rules are out there, even though sometimes I'm continuing to be surprised that a lot of people still

• 45:56Speaker 02

  don't understand them. And so we shouldn't be charging a management fee. If you're putting a wrapper around a long only product that's trading stocks or something that is clearly defined like an index, then charge a servicing fee. That is a management fee. Charge whatever couple of basis points. The market forces will dictate what the right price for that is. But you clearly don't deserve a performance fee for that. Head strong in general, not just us, not just trend following traders. Every trader that is out there saying that we're producing something that's different. We're producing alpha. We're producing something that's valuable and uncorrelated to all the other beta return streams and benchmarks that people are using. They should be charging an incentive fee. And what else? Yeah, I think

• 46:39Speaker 02

  it should be incentive fee only. Because if you think that you're doing a great job, and it's a hell of a job to begin with, then that is your paycheck. If you make money for your client that is higher than the rate on return of cash, you deserve an incentive fee. And if not, then not. That's my view on this.

• 46:59Speaker 00

  The first time I heard this argued was from Bill Dunn. He's a pretty forceful guy. That kind of probably shaped my view. Look, I say at the top of this podcast, it's going to be a fight, but you guys are too classy and too nice.

• 47:10Speaker 01

  We agree.

• 47:11Speaker 00

  If I make a Mr. Beast headline, watch these two guys duke it out. And then they're going to listen to the podcast. They're like, hold on, they agree. And they're like friends and they're trend followers.

• 47:19Speaker 01

  My whole point is that it's pros and cons of both. And I think some of it is math and some of it is business and marketing and building the business. I really like what Takahe and Moritzes have done. A few years ago, I talked to a real famous Ival trend follower group who you all know and they charge two and 20 and they proclaim themselves to be fairly classic trend. I tried to, you know, choose my words carefully because they're nice people and I like them. And I said, how do you get around this idea that I'm charging 1%? You know, trend following is classic trend is beta and I'm creating these ETFs and charging 1% in management fee. If you're doing the same thing, how are you figuring that you can

• 47:58Speaker 01

  charge your 220? And basically, they said it's because of the leverage. When we trade so large and our after free return, you have to compare it to the amount of money that we're making. I was like, oh yeah, that's good. I think that's makes perfect sense. Getting back to leverage and stuff, I think some of these managed futures CTAs is shrinkflation. We're going to lower our leverage, lower the return, reduce fees a little bit, but you're still paying more. The bag of potato chips costs the same, but there's fewer potato chips in there now. And that's how we're going to deal with this situation. I applaud Tuckey and their business model and I like it. My whole point is that it's okay to be fixed fee as well, especially since we're 100% upfront that yes, trend following

• 48:43Speaker 01

  beta, classic trend. It's great. It's wonderful. It's super powerful. It's hard to beat. According to CFM a few years ago, one of their papers, it's 99% of what determines CTA performance. I'm unapologetic. I think as difficult as it is to beat the S and P, it's that difficult to beat classic trend with all the additions and subtractions especially. Full speed ahead. And as Moritz said in his last podcast with return stack guys, CTAs are charging incentive fees, they need to beat the ETFs. They must beat the ETFs. The bar is there and the bar needs to be exceeded. And when I posted that on Twitter, I got responses from these type of CTAs, not Moritz's,

• 49:26Speaker 01

  but another group that said, damn right. Every CTA will beat the ETFs. Like, okay, swing it on.

• 49:35Speaker 02

  We live in the eye by the sword. If you are out there charging an incentive fee and whatever shape or form you are more expensive, then these are just fair benchmarks. And we need to accept them, be transparent about this, and we need to be better than these benchmarks over time. Otherwise, our business is at risk. It doesn't need to happen every year, but over longer periods of time, that simply needs to be the case. Otherwise, we deserve to go out of business. The high vol trend following trader that you refer to, Jerry, with the two and 20, you're absolutely right. You can charge the two because the leverage, you don't even see it, it doesn't matter. At the end of the day, if you're making 60%

• 50:16Speaker 02

  or 58 or 62, who cares? It's fantastic gear. It's just the numbers are so big. Whether you chuck the two in or you leave them out, it's, yes, mathematically, it does make a difference. But in the eye of the beholder, when you get a return statement, you probably don't care that much about it. What I do critique, and I want to be very clear about this, is that the industry, the hedge fund industry, I'm not talking about our trend following space here, they got away with this trick or this fee behavior, and nobody seems to be complaining, especially now with multi pot shops, multi strap pot shops, which are even more expensive. Hedge funds used to charge two and 20. Whoever came up with that idea that it needs to be two and 20, I don't know, but it became two and 20.

• 51:01Speaker 02

  Maybe it just fell from the sky. But it's two and 20.

• 51:03Speaker 00

  When I first started poking around, it was six and 25. And you know what six and 25 gets you? The Red Sox.

• 51:10Speaker 02

  Oh, six and 15. Yes. Anyway, so the standard became two and 20. And what happened is that this met made in heaven, that evil match made in heaven, is that the big money that wanted more hedge fund exposure followed these brand name funds and gave them big tickets.

• 51:30Speaker 02

  Hundreds of millions of dollars. And in order for these guys to scale, they needed to lower the volatility, which is exactly what the client demanded. The big stuff on wealth fund doesn't want to have thirty percent volatility in that portfolio, even though they could exit smaller, writing kind of like the same bank for the buck. But no, they want to deploy a big ticket and give out at least a hundred million, two hundred million, five hundred million, something like that over time. And it therefore needs to be at a lower level of volatility. The hedge fund goes, well, bam, thank you, man. That's right. We'll get more money in. We'll lower the volatility. That means we're going to be trading fewer contracts. We can scale the business into the billions, into the multi billions even. When you are at this point, you're very reluctant to

• 52:13Speaker 02

  give up your management fee because the economic value, the financial value of a management fee on such a large pool of capital just stimulates the gathering behavior, right? That is just a great business. If you can get two percent out of thirty billion out of a hundred billion every year irrespective of performance, you're absolutely changing your business, adapting your business in order to be maximizing the value of that return stream. And the incentive fee, which is essentially the component that should be driving the hedge fund and the behavior, that moves into the background because you just have so much money that, you know, you just want to have that

• 52:52Speaker 02

  management fee. That is wrong. And nobody is, even the client seem to be fine with that, which is puzzling to me because they go, really? You're just happy, kind of like throwing away that money or overpaying this level of volatility? I don't know. Think about it.

• 53:10Speaker 01

  This is a true disagreement we do have, or a different point of view and an emphasis probably. Number one, as I said earlier, if you have over a history of investing with a good manager, you're going to pay way more if you choose performance fees versus a management fee. And I disagree totally that you can keep assets under management regardless of performance. People may be incentivized in some sort of internal business way to raise money for a firm that has Consistent management fees coming in, but clients have no reason not to pay attention to performance irrespective of whether it's the clients themselves irrespective of whether they're paying a management fee or incentive fee. I think they're going to pay attention

• 53:53Speaker 01

  to that. We're not just going to keep our money with someone due to the management fee if they're not performing as well. There's at least a middle ground there. I do think it's a macho thing. Yeah, hey, yeah, let's be really tough. I don't want to see my manager making money when I don't make money. Okay, I get that. Okay, I understand that sentiment. It just doesn't look good on the spreadsheet. The spreadsheet says, do you think you chose a good manager? Yes. Now, why would you pay this incentive? It's just going to be lots more money over time if you're correct that they're a good manager. If you're incorrect, you're not going to pay hardly anything. Great. Good for you. At least there's a middle ground there. There's pros and cons to both. If you have an incentive fee with a hurdle rate and a clawback, yes, that defeats everything.

• 54:37Speaker 02

  If you have green management, it just incentivizes you to lower your volatility even more. Because I agree with you, Jerry. If you're underperforming over the long run, the clients have no business keeping their money with you. They will at some point redeem. But if you then lower the volatility, the probability of you underperforming severely is also reduced. It's like you're hovering around, you're sitting on this honey pot, and it just eventually you'll get a winning year again. It changes the business behavior. And when I compare this to what we've seen with Tim Simons and Renaissance, obviously, he gave the money back. He continued to trade and made fantastic returns. Michael Black,

• 55:19Speaker 02

  Pugra, family office now for whatever, six or seven years, trading at higher volatility, making more money than ever. That used to be different when he was still in the management fee business. Maybe it unleashes something that when you get rid of the management fee and you depend on the performance fee only, yeah, it could be a positive thing.

• 55:39Speaker 01

  It might be somewhat positive, but I don't think it's a game changer. That is a good point you brought up about whatever is causing managers to have lower, on purpose, lower volatility. Utility, lower performance, I think it's on purpose or accidental. The client need to be aware of that. It's incumbent upon the client to take that responsibility. Another thing we left out, because I feel like in some respects today, I'm like the lead marketing person. Although you said you're never going to hire a marketing person. I'm kind of the lead marketing person here today for Tuckahoe. And that is another thing I was very impressed with. The recent podcast you guys did is Moritz, I had never heard this before disclosing that there is a maximum AUM. Brilliant, brilliant. And so he's not going to water it down and hope to get 500 million or so under management. Commodities will still be a huge presence.

• 56:23Speaker 01

  No watering down, no raising money just for the sake of earning fees, whether it's performance or incentive. But that's another great idea. Think about that clawback.

• 56:35Speaker 00

  I want to offer something for the audience, too. In the last few minutes, might have been the only fighting in the entire conversation. But what's really nice about it, though, too, seriously, from a big picture perspective, in a world where people are screaming nonstop, they might have disagreements, even for something like American politics. It used to be on these finer points, you could put smart people in the same room and you could weigh the pros and cons. We've devolved from that. So I do appreciate that while we do have some differences of opinion between you both, it's nice to have that kind of intellectual, hey, here's one case, hey, here's another case. So, good job.

• 57:16Speaker 01

  Oh, thank you.

• 57:16Speaker 02

  Yeah, we don't have that management fee and therefore no incentive to add together. It's a great point. Thank you, Jerry, for bringing it up. We depend on the performance fee only. And hey, if we ever get to 500 million, that's going to be a great business. We're not in the eager game where we have to be on the front cover of the Bloomberg magazine as the next multi-billion dollar hedge fund. We're just here, small team, to make a bunch of money, hopefully for ourselves and for our clients who like us. One of the ways we think that is responsible also to our clients is to stay diversified over time and to trade that system with the markets that we're currently trading, which includes canola, which includes lumber, some of the smaller markets. It's just impossible for us to trade in these markets appropriately if we were a multi-billion dollar fund.

• 58:00Speaker 02

  These markets are so important for our return stream because they're so different. We just want them to be in, that's it. And to the point of hiring a marketing person. I really don't see it. I don't see anybody running around with just a tuck of hay flack and going into the family office buildings or using LinkedIn to reach out to hundred worth investors. It's kind of like shy to begin with. At the end of the day, whoever invests, they will have a conversation with me, with the other Moritz, with the two of us, and not with the marketing person because we're the ones putting the trades on. We're the ones developing the systems. We're the ones putting the risk on. It's not the marketing person.

• 58:42Speaker 01

  Really, the definition of what private fund used to really be, it was really private. I applaud that angle as well, making sure you know your clients and know what they're getting into.

• 58:51Speaker 00

  Guys, let me wrap you up. Jerry, where can we send people? I always say this, it doesn't make a difference almost whoever anybody is these days. If you can't find people by their name, like there's something wrong with that person that's doing the search. But where can they find you, Jerry?

• 59:06Speaker 01

  Point is a good place, rjpjr12. Website is being updated, so give us a couple more months on the website, chestpeacapital.com. We'll have a new improved version one of these days. But I have a lot of fun with X, Twitter, rjpjr12. Thanks for having us. It's been a blast. Really enjoyed this.

• 59:24Speaker 00

  Moritz, where can we send people? Where would you like to direct potentially new clients to go?

• 59:29Speaker 02

  I agree with you, Mike. If you can't find us or me on the internet, then there's probably a reason and you shouldn't be finding us.

• 59:36Speaker 00

  It's an IQ issue.

• 59:38Speaker 02

  Google is a good start, but Tucker Hay but Capital, this is the website of the company. You'll find us on LinkedIn. If you type in Moritz Seibert or Moritz and Tucker Hay into a Google search box, a wonder will happen. Something will come up. And if you click on one of these links, you'll find something.

• 59:54Speaker 00

  It is a great filter though, right?

• 59:56Speaker 02

  Yeah, it really is. So that's where you can find us. We're always very happy to have conversations with interested people. Not necessarily only if they want to invest. We have a couple of calls just to chat with people. We answer questions. We're here to hopefully explain it all in a good way, like you do, Mike, like you do, Jerry.

• 1:00:16Speaker 00

  Guys, listen, appreciate it.

• 1:00:17Speaker 02

  Thank you, Mike. Thank you, Jerry.

• 1:00:19Speaker 01

  Thanks, Moritz. Thanks. See you.

• 1:00:26Speaker 03

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