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Kenneth Tropin

lines on the record: 68
first: 2022-08-12
most recent: 2022-08-12
sittings or episodes: 1
sources: podcast

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“It is, but you know, we have a lot of technology to support all of that. We have risk systems that are live P&L reporting models that tell us what every trader's performance is every minute of the day that the markets are open. And then we meet every day at 930 and have since 2008 to look at every trader's portfolio. How has it changed since the previous day? Who's added to risk? Who's cut risk? What assets are they in? We run stress tests on all of their positions. We see who's performing well, who might be struggling. And, you know, if we have to encourage a trader to reduce risk or do nothing, we as the senior management team of the firm are acutely aware of exactly what the firm's risk is at any minute of the day. And I think it's that discipline to meet and have total transparency.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Different time horizons, different assets. We have traders that are involved in a lot of interest rate derivatives, swaps, the yield curve, things that our trading systems don't always get involved in, but our traders will. So, for example, as you know, there's been this giant flattening of the yield curve. That's been something that a number of our traders have been involved in, something that typically the technical systems wouldn't be so involved in.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“That sort of peaked in May, and a lot of our traders got involved in that and benefited from rates going up in Germany and rates going up in the United States. There are other times where they have very different time horizons. And so one trader might be long U.S. fixed income and a trader right next to him is short, and they could both actually be right depending on the time horizon. So somebody who has a very short-term trading style. Could be short for a week and get out and make a profit doing that, while the other trader who's long is waiting for six to eight or 12 weeks for his position to accomplish what he thinks it should accomplish.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, the answer is yes to both. So we currently have 15 different teams, not 18, although there are a couple of teams that are pretty close to joining us. And many of them are going to be trading the most important macro markets. So that's fixed income markets. That's the equity markets. That's the foreign exchange markets, and to some extent commodities. Some of them are going to have similar views when really interesting big moves are happening. An example of that is there was a big move up in rates.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“But then there are some models that are value based, that are fundamentally based, some that are smart systems that are learning Systems. So there are a lot of different ways to hopefully make money in the macro markets that we are involved in.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Well, as you sort of referenced, we do a lot of different trading styles of Graham. We do discretionary macro trading, which is typically a portfolio manager, and we have some number of portfolio managers, 15 or 18 different portfolio managers, that independently manage a book of risk assets. And they will decide what they're going to buy and sell and they're going to live with certain risk policies, and they're going to hopefully not be all doing the same thing at the same time. And then we also run a large quantitative business, which is a model driven computer trading system business that is also really diversified in the types of models it uses. Some are pure momentum-based models, which people identify with trend following.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“So there are lots of it's a great question. There are a lot of technologies that people use that we use. Some of those technologies can include having multiple signals. and multiple time horizons. So maybe your quick systems get shaken out on a sort of minor or medium reversal. Your longer term systems, for example, take longer to get knocked out. And so most people I know who do this do not have one time horizon. They use multiple time horizons. That's just an example of a technique. Easy to understand”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you're able to do that in a diverse number of markets, an asset classes while managing risk in the markets that aren't trending, That's in general how trend following works, it's much better to be involved in trend following when markets are moving and when markets are quiet and sideways, not as easy to make money in trend following.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“A good trend following system will identify based on momentum signals that a trend is underway. Let's take a recent example, energy prices. Everybody knows energy prices have gone up in the last six months quite a bit. And a simple trend following system is going to identify that this is a strong trend and is going to get you on the right side of that trend. Now, at some point, that trend is going to end that same trend following system is never going to predict the exact top, but it's going to get you out of that trend after it's made some amount of profit on the way up. And it's always going to expect to lose some of those profits when the trend reverses, but still end up capturing the meat of the trend. So if you could say that the maximum size of a trend was, say, 100, maybe you might capture. 60 70% of that trend”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so was Trend following systems that I designed. And they had some features to them that were intended to take advantage of what's very good about trend following, which is sort of capturing these big right-tail moves. But we're also intended to not have some of the givebacks that people associate with trend falling when trends reverse. And those were techniques that I came up with that I thought would work. They ended up being pretty successful. And that's, you know, in the early days of Graham, like any new hedge fund, I did everything from designing trading systems to executing those systems.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Know it was, I mean, this is not an easy thing to do. Ever, I would say it was probably somewhat. Know easier to do in 94 than it would be today where the world has become so institutional. And, you know, I've been longtime close friends with Paul Jones and Mark Dalton, the president. And, you know, when Paula, the founder CEO of Tudor. And when I left Henry, we talked about should I, you know, a couple of ideas I had about starting my own fund. And they were kind enough and eager to invest and help me seed Graham, which made it a lot easier to get the fund off the ground. We began trading in, I guess it was July or something like that of 1994.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, let's face it, right? I mean, what was the year that they were down 3 0 to the Yankees or something? And then they ended up prevailing in that World Series. I'm a Yankee fan, so I can't say I was rooting for that, but that's what happened.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, I mean, he now owns the Red Sox and a lot of relocated to Boston, right? You know, he's done very, very, very well. He's left the finance world, but he's certainly not left the business world.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, John was one of our managers that we had our clients invest in. And in 1989, he and I explored me leaving Deanwitter to join his pharmaceo. His company was in California at the time. I wanted to be on the East Coast. We moved the firm to Connecticut. And I was there for about four and a half years. And then he and I saw things differently in 1993 and a parted company. And had a lot of time to think about what I wanted to do. And ultimately decided I wanted to start up my own fund. And that's how Graham got underway in the spring of 1994.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, relatively simple trading systems made money. And, you know, they had volatility and people were okay with volatility because everything was volatile back then. And so, you know, it was relatively, I won't say straightforward because I don't think generating consistent profits has ever been something that's so straightforward or so easy. On a relative basis, it was easier. And of course, when you have a young industry, that's a great time to get involved.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, it was an era where, you know, first of all, the markets were really inefficient, right? Right. So it was very fertile to do what we do because markets moved a lot. There was a lot of volatility. And I think it's almost a polar opposite of where the world has been the last few years where volatility has been somewhat subdued. And equities have been such a strong performer. But back in 1982, stocks were very quiet. They were in a trading range. Interest rates were super high. Commodity markets were moving a lot, and there wasn't a lot of competition if you were a trader in that early part of the industry's history.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, no, no, no. And in fact, I think we got as high as 20 early in my career. And so, you know, it was a very interesting time to begin, which I did as an account executive at Shearson. And then in 1982, Dean Witter recruited me to join them and to really start managing what was their fledgling hedge fund practice, which was really with CTAs back in that era, and then it evolved into more macro-style funds.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, here we are at a very different place and time, so it's kind of cool to reflect back on what was happening in 1980. Like this.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source