Systematic trend following hedge fund switches engines with markets

BG, Opalesque Geneva:

A strategy that claims to catch trends, which many investment models don’t, does so through an original two-engine system, where each engine can take over depending on the market.

That Tahoe Fund, L.P drives this strategy. It uses a proprietary Systematic Hybrid™ Trend-following program with two “alpha engines”: The first monitors 72 global futures markets and invests long or short when trends break out to generate returns in both rising and falling markets. It mainly focuses on commodities, interest rates, energy, currencies, stock indices and metals. The second engine invests long-only in US large-cap stocks, primarily in consumer discretionary, materials and healthcare. Risk is controlled by position limits and size, dynamic stops, diversification, and entry and exit points.

“Together, both engines form a robust strategy that can generate returns in both bull and bear markets,” say the managers. “During periods of low volatility, the stocks engine drives performance. When volatility increases, the futures engine takes advantage of the increased scale and number of movements in global markets.”

Incline Investment Management (IIM) CEO Ted Parkhill will be presenting at the Small Managers – Big Alpha Episode 10 Webinar on Oct. 4 at 11 a.m. ET. He has over 25 years of management experience in the investment business, and prior to co-founding IIM in 2010 he was President of Parkhill Financial and an Assistant Professor at Sierra Nevada College.

He manages the Tahoe fund with Todd Hurlbut, CIO, who was a principal, founder and executive director of Everett Capital Management, LLC prior to IIM.

The stock market never changes

The philosophy behind this type of investing is based on the principles that, first, prices reflect the sum of knowledge of all market participants and, second, investor behavior repeats itself over time, which in turn helps to reinforce directional trends. And a systematic approach can best capture these directional movements. In the end, managers say, systematic discipline is more prudent and logical than selfish investing. And finally, trends last longer than you think.

Managers cite Jesse Livermore, an American stock trader credited with pioneering day trading, who said in 1940, “…Human nature never changes. That’s why the stock market never changes. Only the faces, the bags, the jerks and the manipulators, the wars, the disasters and the technologies change. The market itself never changes. How can this? Human nature never changes and human nature drives the market – not reason, not economics and certainly not logic. It’s our human emotions that drive the market like they do most other things on this planet.”

The deposit

The $23 million fund launched in July 2012 and has since outperformed its benchmark, the HFRX Macro Index. According to documentation from Opalesque, it has net annualized nearly 7% since inception and is up 14% YTD through August. During the month the fund was short exposure to currency and interest rate futures and long exposure primarily to commodity futures.

At the end of August, the HFRX Macro: Systematic Diversified CTA Index was up 15% year-to-date and the SG CTA Index was up 21% — compared to the S&P500’s -17% year-to-date.

Incline Investment Management LLC is an alternative investment manager based in Incline Village, Nevada.

Next webinar:

Little Managers – BIG ALPHA, Episode 10

Episode 10 of this groundbreaking interactive webinar series brings you another panel of extraordinary investment managers:

• Manjeet Mudan, Carmika Partner
• Aman Oberoi, K2Q Capital
• Ted Parkhill, Incline Investment Manager
• Pascal Rohner, Katch Investment Group

When: Tuesday, October 4 at 11 a.m. ET

Free registration:

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