Posted by: jhamon | August 11, 2009

“Markets reflect human nature, and human nature is often wrong.”

Rob Friendl is a man after my own heart; a systematic trader of the first tier.  From FT.com:

Systematic trading may inherently be guided by the same considerations. But this approach goes about investing in an automated way, based on intricate algorithms based on years of historical performance that restrict input of sentiment and hunches. Computers monitor and interpret market trends. They ignore theories, only concerned with how markets are moving. And they make investment decisions based on short, medium, and longer term time horizons.

“I don’t believe in efficient markets,” says Rob Friedl, co-founder of Wisconsin-based Fall River Capital, with more than $200m in assets under management. “Markets reflect human nature, and human nature is often wrong.”

He trades across seven distinct markets: agriculture, metals, energy, stock indices, short rates, bonds, and currencies. This gives him access to more than 80 specific trades, ranging from unleaded fuel, wheat and zinc to UK gilts, Euribor rates and the Hang Seng index. And because he can bet them either long or short, Mr Friedl has the potential to perform well in any kind of market. “No one time is any more challenging than another – so long as markets trend,” he says.

Mr Friendl does not care if Opec is cutting oil production or who wins an election. His transactions are focused exclusively on when the price of a commodity, currency, or an index breaks out of a trading range. He will be long if it is going up, short if it is heading lower. And when the trend breaks down, he will get out of the trade.

Since inception in August 2000, his fund has generated annualised returns of 16.17 per cent. In contrast, the S&P 500 was down 3.08 percent over the same period.

Good stuff; really good stuff.  I think I’d enjoy a dinner conversation with Rob!  You can read the rest here.

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