Checking in on the Gundlach Spreads

Jeff Gundlach of Doubleline has been throwing out some big trade ideas lately – the kind he characterizes as something an ambitious young hedge fund manager looking to take a huge risk might take. Maybe we should add the term Gundlach Spread to our list of spreads. His big contrarian call last April – short Apple/long natural gas – generated a ton of attention, as has his more recent short Yen/long Nikkei trade recommendation. So how have these trades performed since his calls?

Disclaimer: past performance is not necessarily indicative of future results.

After coming dangerously close to going negative last fall, the short AAPL/long nat gas trade has been on a tear. Technically the Gundlach version of this trade included leveraging it 10x, which would make these returns (and the risk) even more eye-popping. What about the Japan currency debasement spread?

Disclaimer: past performance is not necessarily indicative of future results.

So far, the newest Gundlach spread is on a similar trajectory as his famous call from last year (11.24% vs 11.12% for the AAPL/NG trade at the same point after the call. Disclaimer: past performance is not necessarily indicative of future results.)

While the Apple stock side of his first call makes it the stock trading territory of hedge funds, the Yen/Nikkei spread is something easily accomplished via the Yen and Nikkei futures markets, thus bringing it into the purview of managed futures. Indeed, several managers we follow are enjoying the opposite trends in both – Yen down, Nikkei up.  This highlights an interesting component of multi-market systematic programs which don’t trade spreads, per se.  Even though they don’t trade spreads and consider spread data – they create spreads in the course of their normal trading by riding one trend in one market and another opposite trend in another market.  And when we talk about controlling risk by market diversificaiton, this is what we’re talking about – creating “spreads” of sorts with different positions in different markets.

Now, this spread isn’t the same thing as being short corn/long wheat or similar, which in theory could provide some protection from a large directional move in the entire grain complex. And Gundlach’s “spreads” aren’t really ways to remove directional risk and play relative pricing differences; they’re really just big calls on two markets simultaneously. But the fact that managed futures are “following” one of Gundlach’s latest calls shows there’s more than one way to skin a cat,  and following trends in each market to create a spread can work just as well as making the big call.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.