It’s always nice to sit down and meet with CTAs face-to-face. It goes back to that qualitative element of due diligence in managed futures that Attain emphasizes. We’re not going to recommend a program that we can’t express faith in, and nothing can solidify (or decimate) faith in a program the way looking a manager in the eye does.
Such was the case in yesterday’s meeting with the folks from Sunrise Capital. A larger ($10 million minimum) program based in San Diego, Sunrise is no stranger to the managed futures space, with an extensive track record and attractive pedigree of staff. For us, though, the appeal is in the way they distinguish themselves from their peers. Their flagship program is, in some ways, a traditional trend following program that stems from manager Gary Davis’ and Rick Slaughter’s self-taught stylistics; in the case of Rick, since his college days. When it comes to industry reputation and reverence, they are in the Bill Eckhardt and Richard Dennis category, and were on the ground level as managed futures blossomed in the 1970’s. But that may be where the comparisons to industry stalwarts end, only because their risk management approach is so sophisticated and nuanced that it seems to put them in a category all their own.
How do we mean? As one of many examples, their approach to the traditional trend following’s “letting profits run” may seem like heresy to a subscriber to the Turtle philosophy. While a traditional trend follower looks to latch on to a trend until its end, ultimately giving up some profits at the end of the trade as their models confirm the trend is over, Sunrise manages risk utilizing profit targets and a range of other statistical techniques. As a trend matures, their systems, using a complex interweaving of technical indicators to determine appropriate levels of aggression, will begin to scale back their positions. This approach may best be described as respect for the laws of gravity. What goes up must come down, and in acknowledgement of the violent nature of trend reversions and corrections, they would rather have less client capital at stake the higher they go. Statistically speaking, the higher they go, the more likely it is that things will go back down, and they’d rather limit the upside to some extent in order to minimize the downside on the trade.
This was really just the tip of the iceberg, and there’s a lot more we’d like to find out before we start making any recommendations, but we look forward to learning more about Sunrise and what they have to offer. That being said, it was certainly nice to look them in the eye as the strategy was explained, and thus far, we are cautiously optimistic about what we see.