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Mike Harris

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2024-08-19
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2024-08-19
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  1. “Code FG10. Back to the episode. Right, so the algorithms really are running to show. And, you know, if a company has a great earnings call, phenomenal results, but the CEO doesn't mention AI, that stock might not perform as well as a company that had a mediocre corker, but the CEO is talking all about AI. But you do not trade individual stocks. You only trade futures, which are futures on interest rates and futures on equities as well as commodities, but you're just futures, right?”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  2. “And basically, two important basically government intervention items happened over that weekend. Number one, the Swiss government effectively pushed Credit Suisse into UBS's arms, kind of dealing with that global bank issue. And then on Sunday, Janet Yellen came out from the U.S. Treasury and said they were going to effectively backstop any regional banks that had issues. And so Monday, we went right back to the highs. And having just gotten short in that first couple of big, big day moves, the week prior.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  3. “With the regional banking crisis with SVB and signature and credit suis, and then in October, you had the initial outbreak of the conflict between Israel and Hamas, which also created obviously an initial spike in fall. This is the downside sometimes to being a faster trader is that, you know, let's take March as an example, if you remember that week in March 2023, when some of the regional banks started to have trouble in SBB and signature went down, people were lining up on the West Coast outside banks trying to get their money out. Credit suites, obviously, you know, was struggling. And then we go into that weekend. Our models had flipped from being long risky assets to going significantly short, you know, stocks and energies.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  4. “And delays there. So you had both an initial spike involved when Putin crossed the border into the Ukraine. And we all thought it would be a two-week conflict. And then obviously we started to realize this was going to be a much bigger issue, particularly for Europe. And so you had that initial big moves in March, which we were able to capture. And then, you know, in the later part of the year as markets continued to trend and in some cases break out of ranges. We were able to do well. Our peers were able to do well. But if you look at 2023, there was almost no volatility. Volatility, whether you look at the VIX inequities or other volatility indices across asset classes, there was ball compression, meaning it would just basically trend lower for the vast majority of 2023 actually really only had too many spikes involved last year. One was in March.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  5. “Bring up two examples. So the first one is we are a long volatility strategy. So when there's not a lot of volatility in the markets, markets aren't breaking out of their recent ranges. And we, quite frankly, don't have a lot of opportunities to trade and hopefully make profits. So if you think about it, let's look at the last three years as an example. We've talked a little bit about 2020, but if we focus on 2022, that was a great environment for both being a short-term trader and being a long-term trend follower. You had obviously the outbreak of the conflict between Russia and Ukraine, which created a lot of volatility in March of 2022. You also in the second half of the year had ase inflationary pressures that were kind of feeding through the market on the back of the pandemic and some of the supply chain issues.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  6. “Your strategy really shined is when you have large amounts of volatility in a short period of time, I can't think of a more apt example than March 2020. What is the obstacle? All strategies have environments where they do great, environments where they do less well. What are the strategies where being a short-term trend follower is not a good environment? Or it's just a lot tougher.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  7. “On the flip side, when you look at a prolonged crisis, I mean, think of the global financial crisis that dragged on for two to three years in some cases. There were very, very long and robust trends. And those longer-term managers were able to capture many of those movements. At the end of the day, it's a little bit like a baseball team. You have different players who play different positions in your portfolio to help you in different points of market stress.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  8. “The biggest differentiator when you're doing trend following is your time horizon or your look back. So most trend followers tend to look for medium to long term trends. So medium-term trend might be a trend over, let's say, a one to three month period. And a long-term trend may be, say, three months out to a year, in some cases beyond a year. But as I was saying before, where I think we're unique is that we are a short-term trader. So we're looking for trends just for in some cases a handful of days. I'll give you an example. So think about the gold market this year. Gold had been in a very tight trading range for the first couple of months of the year, really not going anywhere, probably in large part because”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  9. “Times one of the most diversifying, as you can imagine, what's driving the price of natural gas is probably a little different than what's driving, let's say, global interest rate policy, which is having an impact on FX fixed income and the equity markets from a CTA perspective, the earliest form of systematic trading, you're right, is trend following. There are lots and lots of ways to implement trend following. You can do it on different types of markets. Some of our peers and competitors in recent years have made headlines by expanding their portfolio into new markets, going into interest rate swaps and credit default swaps and exotic commodities and non-deliverable emerging market FX in order to try to look for trends in non-traditional markets. But I think probably.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  10. “Let me unpack a couple of things that you just referenced. First, the term CTA or commodity trading advisor is in itself a bit dated in the late 60s, early 70s when the industry really started. The only futures contracts that were available to trade in liquid were commodities. So the regulatory designation that we all had to take back then was that we were commodity trading advisors. Obviously in the 1980s financial futures were launched. And now when you think of a typical CTA portfolio, unless someone is asset class specific, it's much more diversified. So you're trading equity index futures around the world. You're trading fixed income futures, either currency futures or OTC effects. And then obviously commodities continues to be the fourth asset class in that mix.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  11. “Is CTA's commodity trading advisor? That can mean a lot of different things, but I think of a core part of that, not strategy, but that world is trend following. So oil is at $70. It goes to $71. Then it goes to $72. Your models pick it up. They start buying. It goes to $73. And something that went from $70 to $72, it's more likely to go to $72 than $74 and $70 statistically. In other words, if it's going up, you buy it. And that the back test for those very simple models are quite impressive. So how much of your current strategy you're being quest, it revolves around some form of trend following. Oh, natural gas went from $2 to $2.10, it might go to $2.20.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  12. “Tend to do very well. Markets react. They break out of recent trading ranges. Our models pick up on that. We're able to kind of load into those trades very quickly. And the profits that we make during those times of turmoil, we kind of jokingly say we're putting the hedge back in hedge funds.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  13. “Traders, which is typically people that trade faster than, let's say, two weeks. Our average holding period is about six to nine days. But as you can imagine, we have some trades that happen intraday, which would be our fastest. And then probably our slowest or about 40 days or so. So we try to capture momentum in the markets in a number of different ways. And I think really one of the things that Quest is known for is our focus on delivering positive SKU or convexity in our return profile. When volatility picks up in the markets as a result of who knows, a surprise economic release, a geopolitical conflict, something that the market wasn't expecting or pricing in, positively skewed strategies like ours.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  14. “Back on and be able to help, you know, ultra high net worth families invest not only in traditional stocks and bonds, but to really help them build a portfolio to kind of quote unquote keep them rich for the long term using tons of alternatives, private equity in debt, real estate, hedge fund strategies. So that was a lot of fun. And then two years ago, Quest's president was retiring and I got the phone call. I had met Nagal at a number of industry conferences over the years, I think even probably spoke with him, our founder, and was excited when they extended me the opportunity to come and be the president of Quest. And so now I've been there for about two years. Quest is a $2.5 billion short-term quantitative hedge fund within the CTA universe. We fall into the realm of what are called short-term.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  15. “I was fascinated by the buy side and wanted to kind of understand, you know, how are they coming up with these trading decisions? Were they using data and models? Obviously, the quantum approach, or was it just a bunch of smart people sitting in a room coming up with an investment thesis and acting on it? So I made the transition over to Campbell& Company, which is one of the oldest CTAs founded back in the early 70s. I spent 12 years on the execution side there and then became president of the firm and did that for about eight years, kind of running that large multi-billion dollar CTA. Pseudo retired at the end of 2019, had a bit of a sit out due to non-compete reasons, ran a multifamily office, which was incredible to put my allocator hat.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT

  16. “Thanks again for having me on. I'll start by just telling you a little bit about my background. I think it's unique because I've been in the quantitative hedge fund space literally since the beginning of my career over 25 years ago. I started at Morgan Stanley as an allocator to quant funds, CTAs and macro funds. I kind of caught the trading bug, if you will, when I was doing due diligence on a lot of portfolio managers sitting on desks, wanted to kind of get a taste for trading the markets myself, became a sell side futures options and currencies broker, covered a ton of CTAs and quant managers as well as discretionary macro and then realized that you could train a monkey to do what I did back in the old days kind of on two phones just herding order flow back and forth between buy side trading desks and the floor in many cases.”

    2024-08-19 · Forward Guidance · The Strategies & Risks In Quant Trading | Mike Harris · IDENTIFIED FROM THE TRANSCRIPT