Commodity Volatility, Global Macro, and Trend Following with Alan Dunne from Archive Capital

Happy St. Patrick’s Day! The luck of the Irish is on our side as we celebrate today’s episode with Dubliner Alan Dunne, CEO and Founder of Archive Capital, a boutique multi-asset and investment research firm focused on global macro and managed futures strategies. Alan has worked in the financial markets and investment management industry for over 25 years at hedge funds and large investment banks as a CIO, hedge fund allocator, macro strategist, and technical analyst. During our exciting chat with Alan, we focus on the crazy volatility in commodity markets, how macro traders have evolved over the years, and why crisis periods can be good for a trend managers’ track record. Plus, Alan plays “Where Would You Invest 10K, 100K, and 100 MM?” So, grab a green beer, keep calm, and shamrock on because we’re jumping right into the pot of gold this week!

Follow along with Alan on Twitter @alanjdunne and visit Archive Capital’s website. And check out our new Trend Following Guide!



About Alan Dunne

Alan Dunne is the Founder and CEO of Archive Capital, a boutique multi-asset and investment research firm focused on global macro and managed futures strategies. He is also a co-host of the Top Traders Unplugged podcast. Before founding Archive Capital, he was Managing Director and a member of the investment committee at Abbey Capital. He started his career as a foreign exchange analyst and trader, working for Bank of America in London, Hong Kong, and Singapore and BNP Paribas in emerging markets before returning to Dublin to join Allied Irish Capital Management, a global macro commodity trading advisor. He was subsequently Investment Director of Royal Bank of Scotland’s wealth management business in Ireland, where he headed the investment team and was responsible for asset allocation. Alan is a CFA Charter holder and holds an MSc Investment Management from Hong Kong University of Science and Technology, an MBA from Smurfit Business School, and a BA (Mod) in Economics from Trinity College Dublin.


Check out the complete Transcript from this weeks podcast below:

Commodity Volatility, Global Macro, and Trend Following with Alan Dunne from Archive Capital

Jeff Malec  00:07

Welcome to the Derivative by RCM alternatives, where we dive into what makes alternative investments go analyze the strategies of unique hedge fund managers and chat with interesting guests from across the investment world. Happy St. Patrick’s Day, we’re helping you celebrate by going to Ireland talking with Dubliner Alan Dunn on as the CEO and founder of archive capital, focus on research into managers in the commodity ball trend at macro space right up our alley. This was a great chat with Alan on the current craziness and commodity markets, how macro traders have evolved over the years and why words are a good thing and a trend managers track record. So grab your green beer and let’s send it This episode is brought to you by RCMs managed futures group whose experienced team has been helping investors that commodity and trend managers for 20 years speaking to those trend managers with all the moves that commodity markets lately, go check out our trend following white Then the Education tab and white paper site back to the Show


Jeff Malec  01:16

All right, Happy St. Patrick’s Day everyone. Actually, we’re recording a week ahead but it’s gonna be released on St. Patrick’s Day. So Happy St. Patty’s Day to our Irish guest Alan Dunne. How are you?


Alan Dunne  01:26

Great, Jeff. Great to be here on St. Patrick’s day even though we’re a little bit ahead of time. And yeah, what you know who better to have on St. Patrick’s Day?


Jeff Malec  01:36

Exactly. Well, it’s great to meet you. I’ve been a fan from afar and heard you on top traders unplugged and whatnot. So good to meet you. What’s the holiday like over there in Ireland.


Alan Dunne  01:46

It’s a it’s actually a big one this year because with COVID. There was an extra public holiday allocated this year. So that’s actually coinciding the day after St. Patrick’s Day. So it’s a mega holiday weekend. So it’s going to be a pretty big weekend and you’ve got the Six Nations rugby culminating that weekend to might mean a whole lot to you guys. But it’s a big deal if you’re a rugby fan in Ireland, and you’ve got a whole host of things obviously St. Patrick’s Day celebration, so it definitely will be a big weekend in Dublin.


Jeff Malec  02:23

Who are the Six Nations that participant


Alan Dunne  02:25

that are Ireland, England, Scotland, Wales, France and Italy.


Jeff Malec  02:30

So you keep the Kiwis out of there.


Alan Dunne  02:34

So someone else yeah, we played a key reason the Aussies in the Springboks. Typically in the autumn, they tend to come on tour here. And, you know, it’s good chance to see who’s kind of in the ascendancy outside of the World Cup, they don’t tend to play the northern hemisphere is and some mammosphere deems that much. But the Six Nations that used to be the five nations, you know, it’s been gone back many years and it’s kind of the big domestic are suppose big northern hemisphere. rugby championship.


Jeff Malec  03:04

Fun. I’ll look, I’ll look for the results. How’s Ireland?


Alan Dunne  03:09

Pretty, pretty good. I mean, we’ve got that will be the final round the St. Patrick’s Day weekend. There is rugby this weekend on underplaying England. So obviously, the result of that will be age when this is an Ireland, Scotland in the final match. So it’s, you know, they tend to be pretty good, good social events, too. But you know, the rugby is pretty exciting, too. So looking forward to


Jeff Malec  03:32

that moment. And where in Ireland do you live?


Alan Dunne  03:36

So I’m living in Dublin pretty close to the city centre. I actually, you know, if I looked at my window here, I’d be able to see the Aviva Stadium where, where they play the rugby. So I’m very central and yeah, very, very well set up for all of that.


Jeff Malec  03:51

I’ve never been so I got to come visit. It’s not on my list.


Alan Dunne  03:54

Absolutely. You know, if you’re if you’re if I’m not so much a golf fan, I’m, you know, probably be a bit 36 handicap or something like that. But if you are a fan, you definitely find lots of great courses over here.


Jeff Malec  04:08

I love it. So let’s jump right in and talk about the crazy volatility and commodity markets past few weeks. What jumped out to you most watching this price action?


Alan Dunne  04:18

Yeah, I mean, it’s, it’s interesting. It’s, it’s, you know, we were chatting just before we came on, it really feels like kind of once in a generation type of price moves. You know, when I started off in the industry in the 90s, you know, I was, I was a trader and analyst back in Bank of America in the mid 90s. And when you started off in trading, you read lots of boxes to try and figure out how to try and make money trading. And you know, one of the first things I read was Market Wizards and you know, when you read those books, people are talking about the crazy moves in commodities in the 1970s and trading those markets and the market been up limit, you know, limit up five days in a row. And you think, oh, yeah, that’s great, but you know, we’ll probably never see those kind of markets again your day. Here we are, and we’re We’re seeing them. And, and we’re seeing those kind of crazy, crazy events. Obviously, we’ve got a humanitarian tragedy and catastrophe going on in Ukraine. But you know, I think if you were to go back three or four years and say, Well, you know, you gotta have some strategies in your portfolio that might help you out in times of war crisis, people, people wouldn’t have believed it. So it is it is a good reminder that all of these things come in cycles. And just because we haven’t seen something in the markets for a number of years, it doesn’t mean it can come back. And I think that’s definitely what we’re seeing at the moment, obviously, you know, we’ve got, you know, I suppose to move in oil is, you know, it’s not like we haven’t seen something like that before. We’ve seen crazy moves, we, you know, we had negative oil prices just a couple of years ago, we had oil ratcheting up $247 in 2008, only two to reverse very quickly. So, you know, you couldn’t say it’s nothing that we’ve never seen before. But certainly things like wheat and nickel have been pretty crazy by any standards.


Jeff Malec  05:59

Yeah, any of the managers you track tied up in that nickel situation?


Alan Dunne  06:03

Yeah, I was speaking to a manager yesterday, actually, who, you know, pretty, pretty peeved about the situation. And, you know, in terms of they had sold some, some, some some nickel and executed orders. Whenever it was to choose the morning, I think and you know, so those, those those have been cancelled there. So it’s a, it’s going to be very contentious. It’s probably not great, great for the industry, but we’ll have to see how it plays out.


Jeff Malec  06:29

Yeah, my theory, I did a tweet thread on this of like, it basically just they chose, go do a capital call on all the members of the Exchange, or get everyone upset over a few hours of trading and, and chose the latter, right. Exactly. Yeah. But but now it’s gonna get even worse, right? If we open limit down limit down limit down, people are really going to throw a fit of like, Hey, you canceled my salad? 98,000. Now it’s at 28,000? Yeah, no, I


Alan Dunne  06:55

mean, it’s, I mean, it’s the integrity of the market is always what’s so important in the situation. So when that gets on their mind, it’s it really is a serious, serious issue.


Jeff Malec  07:06

And what is generally the Elemis got a great reputation over there. And you came.


Alan Dunne  07:11

Yeah, well, I mean, obviously, it’s, it has been the, you know, I’ve just been reading the history of this. And, you know, people making parallels with the 10 crisis before, which I hadn’t been as familiar with, but But you know, I think, yeah, it’s one that’s going to be a difficult one to manage. And that’s for sure. So So I think it’s just a big reputational risk. If if it’s, you know, depending on how it plays out.


Jeff Malec  07:38

What was the 10 crisis? I wasn’t aware of that one?


Alan Dunne  07:41

Yeah, I just read about it very, it was just alluded to as the most significant crisis for the enemies since since the tin crisis. Yeah.


Jeff Malec  07:50

Got it. And how do you view right, we saw oil went from 95, up to 130 and dropped all the way back to 105. How do you do trend falling in particular is a penalty for these large givebacks of open profits.


Alan Dunne  08:05

Yeah, it’s it’s one that it does irk investors, for sure. And I think, you know, trend following managers deal with this somewhat differently, depending on how they approach things, you know, what you have in some instances, but obviously, volatility scaling up. So, you know, managers will, in some instances, scale back their positions, because they’re going to size their positions relative to volatility. So that can have a nice feature that can be appealing to investors in the sense that you’re, you know, you’re taking profit as the market is rallying in, you know, as volatility goes up. And we saw that as well, in obviously, the big sell off in 2020, as well, if, you know, to the extent you’re not doing that. And, you know, I suppose not just looking at one market, when you get big moves across a number of markets, and then you’re inevitably going to have a correction, and you will have a big gift back. And it can be a bit frustrating. But but you know, one of the big features that you see with trend following is the big gains tend to be when you get that big risk on and then the market extends. And that’s that’s the whole point of trend following that it is uncomfortable. And, you know, people who trade the markets will always say, you know, it’s those positions that feel uncomfortable are often the ones that are the ones that will deliver for your for over time. But that’s a feature of trend following that you have to have that risk on, you might say, oh, might have been better to scale back to position take profits. But if you mechanically did that, that that would you know, take out a chunk of the return that you get in trend following over the years so it’s I guess it’s another of the features of trend followings that return profile that makes us you know, behaviorally challenging for people to hold. But it is what it is and it’s just one of the features you know that what you get in return from that is that very interesting, you know, return profile and particularly alongside that equity portfolio.


Jeff Malec  09:57

Right now view it kind of the investors viewed as a But the managers view it as a feature. So it’s like, that’s probably fair. Yeah, right bridge that gap between the two. And and if you did throw a bunch of profit taking on there would start to lose it. trend following profile. Right?


Alan Dunne  10:13

That’s right, you’re gonna lose some of the convexity because you’re going to be taking profits, and in some of those instances where you get the big move, so you would have already have taken some profits ahead of, you know, you know, maybe the move up from increased from 100 to, you know, above $130. So, you know, so yes, some managers do, obviously managers do volatility scale and effectively take profits as, as the market rally in a rising violent environment. But, yeah, it’s the flip side is you’re not going to have the risk on when you get those outdoor events, as they’re called.


Jeff Malec  10:51

Renu, that can make up for years worth of flat sideways slide.


Alan Dunne  10:56

Yeah. Right. Absolutely. And that that’s what you’re really looking for in the return profile? And, you know, and it’s like, if you look at the periods of where trend following has done well, historically, be it, you know, 2008, or even 2014, early 2015, you know, you’ll see months, you know, for your typical trend for where they’re up maybe eight 10%, two or three months, and you think, okay, that now would be the time to take profits. And yes, there might be there might be a dip, but then you’ll see another two or three months of double digit returns. And, you know, if you if you take your profit, that’s you’re going to take out those really outsized returns out of out of the whole return series, and your overall return, you know, is going to be much diminished.


Jeff Malec  11:40

And how do you, you mentioned convexity in there. So do you do you view the profile more as a long options, convex payout type profile or a momentum? Right? There’s a little it’s a bit semantics and all that evolved, right. But if you’re on a bank platform, choosing risk premia, and you might choose momentum, that’s a little bit different than convexity. Right.


Alan Dunne  12:01

Yeah, it’s interesting. I know, this has come up on the top traders unplugged podcast a bit, you know, you know, what it kind of like? What’s in a name? You know, is it? Is it just trend following? Or is it you know, how much of the return attribution you get? Is it just by following the momentum and the trend, or, you know, a big chunk of it is the risk management as well. So, a equally people say, Oh, managed futures is a long vowel strategy, and it has comparisons with that. And then, of course, you’d have periods where volatility picks up and managed futures actually loses money or trend following loses money. So, so none of these labels, you know, are, you know, fully descriptive of the strategy by themselves, but there are elements to them. For sure, you know, part of the return from trend following comes from the fact that, you know, there are behavioral aspects that the market tends to be stuck in a range for a long time. And then you get something and, you know, a significant event. And what what, what that does, it causes everything to reprice. So, you know, clearly what we’re in at the moment is a clear repricing event because you know, a bunch of supply has been taken out of certain commodity markets, and people are trying to grapple with the new geopolitical regime. So what happens with a REIT with a repricing event, you know, it ripples across many markets, so so there is a trend following elements and that you can capture, but it’s not just that it’s the risk management as well. It’s the fact that you stick with those winners, and you risk those profits as you go with it, that that can generate that that convex profile. And then what that gives you is a return profile that very often does well in a rising volatility environment. And actually, you know, some of the some of the best trades, you know, we’ve been talking about commodities. But it’s been, you know, that the short term interest rate markets have been really interesting for trend followers, as well as your why not only have we seen breakouts and trends, but you’ve seen a massive volatility expansion. And that’s a really, really interesting property of managed futures, that, you know, when you get that vol expansion, you’re into a trade and into a position with a big, big size, and that’s what can generate a really nice return. So there’s multiple dimensions to how you describe what’s going on in the trend following portfolio and where that where the returns come from. And I think that’s where, you know, some people say, Oh, it’s just, you know, following the trend, or it’s risk management, or it’s long vol, it has elements of lots of different aspects. So it is it’s more nuanced than any one of those individually.


Jeff Malec  14:31

And just to dig on to that vol expansion concept, right? If I’m trading whatever a million dollar trend following program in two year notes, I want to risk 50 pips of my portfolio on the trade when falls real low maybe I’m doing six seven contracts or something of two years. Right that’s


Alan Dunne  14:50

it yeah. So so we’re really low vol you can get into a position with a tight stop and and because your your stop is so so so so And it’s a tight start, because volatility is low. And then if you get a breakout and a volatility expansion, then you’re you’re already into the position in large size, but the market is now moving, you know, three or four times what it had been moving for the previous, you know, three or five years. And so you’re gonna have a really a really, really nice risk reward profile.


Jeff Malec  15:24

Right? And I think that’s probably that’s what makes it convex, not just a momentum trader.


Alan Dunne  15:29

That’s exactly yes. Yeah. Yeah. Um, and then, on that


Jeff Malec  15:32

topic, what what are your thoughts on the managers who do some vault targeting? That’s kind of been a, it’s a little bit of a knock on some write of like, okay, if I take away that convexity, by doing vol, targeting, the ball expands, now, I have to reduce position size.


Alan Dunne  15:47

Yeah, I mean, you’ve got different shades of this, that people will, will do that to a degree and that will dampen it, but obviously, you will tend to adjust to volatility exposed, so you can still capture that, that those periods of volatility expansion, I think, you know, I think you have had historically, philosophically different approaches, and, you know, trend following has evolved in different ways, you’ve got the, you know, the turtle trading type approach of, you know, risking a certain amount on on discrete bets, and doubling up and managing the stop losses on kind of a on a on a, on a position by position basis, versus the more holistic, you know, managing the risk in the overall portfolio. And, and looking at the risk and volatility of that overall portfolio. So, you know, that’s not to say one is right, one is wrong, they’re just, they’re both, you know, trying to take advantage of a phenomenon that people believe is there in the market so that you get these big moves and trends of markets. But I suppose it’s solving for maybe a different utility in the sense that, you know, okay, not everybody is going to have the appetite to stick with the return profile you get with the more traditional approach of really running at that high level. That’s not to say that they did the more nuanced approach of managing the volatility is wrong. It’s just, it’s just saying, Okay, we don’t want that extreme volatility. We want to, you know, behaviorally have a different type of return profile. So we’re going to approach the problem slightly differently.


Jeff Malec  17:26

No, but we’ll get into that in a minute of, maybe you put a portfolio of them together to solve some of it. What are your thoughts on investors looking at trend or commodity exposure? Now, after such a run up, right, I think back to 2008, tons of money flowed into the space, starting, you know, 2009, when everything rallied back, ball crushed, and four years later, yet a lot of people unhappy with managed futures and trend and flowing right back out of this space. So what are your thoughts on? Did they miss it? Is it the start of something? Is it that I know, it’s an impossible question, but give it a shot?


Alan Dunne  18:07

It is an impossible question, I suppose. And, you know, you can you can try and make parallels, and maybe, yeah, is to designate the right parallel, you know, even if he’d go back to that period, we had seen, you know, a good period for trend following and that whole decade, you know, the 2010 decade was a good decade, because you had, you know, you had an equity bear market in 2000 2002. Then you have the commodity secret supercycle


Jeff Malec  18:34

was that, sorry, yeah. The second bear market again.


Alan Dunne  18:38

Yeah. And then the second bear market, and oh, ah, and before that you had a commodity supercycle kind of 2000 567. So we had really strong moves in commodities in that period. So and it, you know, yeah, it is an impossible question. I think, you know, at some point, obviously, there will be a give back in this move. But at the same time, you know, if you look back at where we’ve been, for the last 1020 years, certainly the last decade was unusual to 2010 to 2020. And from a macro perspective, you know, we had very low volatility in GDP, you know, if you look at US GDP in that period, on a quarterly basis, it was between maybe minus 1% and plus 2%. I can’t remember the exact numbers, but very low GDP quarterly, there was no recession in the whole period, there was no boom. So you had this kind of concept of secular stagnation. So from a macro perspective, it was very slow and steady, not a lot going on in the world. We didn’t have an equity bear market in that period. And, you know, maybe not so much geopolitical risk. It’s always hard to quantify how much of that we’ve had. But certainly, as we moved into this decade, it’s been very different. Obviously, we’ve had COVID so that precipitated a deep recession and a big recovery. Now we’ve got, you know, we had started to see The volatility in relation to the Fed tightening cycle. And now we’ve got a, a war between Russia and Ukraine. So it’s already, you know, shaping up to be a very different decade, it would be, I think it’d be foolhardy to suggest that we’ve seen the volatility and things are going to revert back to what it was like, for the last decade, I would think a more reasonable expectation would be more volatility ahead, we still have to navigate the Fed reducing their balance sheet from eight, 9 trillion, whatever it is. So that’s going to be a challenge at some point, you know, they have to think about the timing of that. So I think there’s still plenty of risk out there, I think. And I think it’s a good environment for managed futures and macro oriented strategy. So I think it is still a good time to be looking at them.


Jeff Malec  20:49

And as you mentioned, macro, what are your thoughts there is the world moved away from the classic, discretionary macro guy taking a huge bet on XYZ market? And that’s more systematic. Now. Those worlds have kind of blended?


Alan Dunne  21:03

Yeah, it’s interesting. I was talking to somebody about that just just earlier today. And if you go back maybe five years ago, there was this big interest in systematic macro quant macro. And, you know, we were talking about why it was that it was Partially, partially maybe a little bit of discouragement with traditional trend following and people were saying, okay, maybe quants, strategies purely focused on the price are not enough. And, and maybe there’s something interesting in, in the whole systematic macro space. But but talking to people that seem to have been more interested in the discretionary macro space this year, and I guess that makes sense in an environment where you get something very different. And people might say, well, this is an environment that favors being nimble, being opportunistic, not relying too heavily on relationships, I think, you know, I come from a multi manager background, so there’s, he can always see the merits of blending different strategies, and the reality is, all of these different approaches will have their their particular market environment where they will do better or worse. So I can see the merge in discretionary macro making making a comeback. Now, interestingly, as is often the case, you know, we saw a lot of the macro has, you know, either stopping to manage external money or just, you know, shutting up shop in the last year, you know, three, four or five years, and that’s often a sign things are going to improve. So sort of cycles that have proven to be to be, you know, repeating again. And so I think, I think it is definitely an interesting environment for discretionary. And that’s, that’s been proven in what we’re seeing in terms of manager performance data at the moment. And that’s not to say that some quant strategies can’t can’t do well in this environment.


Jeff Malec  22:51

To me, it’s like they’re finally right after 12 years, right? The discretionary guys were like the Fed’s balance sheet, all this stuff is causing problems in the right, equities just rallied straight up. So I think they got a lot of you guys aren’t good. You didn’t catch any of this bull market in equities. And that’s kind of where investors float out of discretionary.


Alan Dunne  23:09

Yeah. And I think, you know, when I started off, I spent a lot of time in trading floors in the early part of my career, and people traded, obviously, with a macro mindset and macro traders always have that bearish, bearish mindset of what’s gonna go wrong in the world, whether it’s like, there’s no reason for bond yields to stay there. So that, you know, there’s always going to be that bias to be to be short bonds and low yields, there’s always going to be that bias to try and pick the top in equities and look for, for the catalyst for the reversal. So in the same way it has, it has some integration, it was it was a tough period for trend following it was also a more difficult environment for for that type of traditional macro in the last decade. And that’s obviously changed now.




Jeff Malec  23:51

And along those lines, just having been in the industry, so long, what do you see both in the macro the man’s feature space, the overall hedge fund space, like what’s changed the most in the last 20 years?


Alan Dunne  24:04

I think, you know, I think there’s some merit to what people have said in terms of obviously, we’ve we’ve learned some hedge fund strategies, maybe, you know, have been taking, you know, things that people learned on trading desks, you know, whether it was carried strategies or, or momentum or certain things like that, that were maybe you might have seen busyness now for strategy at one point, you know, 20 years ago that or less so now you’re seeing obviously more and more systematic trading, I would say I mean, you know, if you go back when I started off, quant strategies were still relatively in their infancy you know, remember I started off on an FX trading desk and there was a guy there running quite models trend following models, but they weren’t there was a bit of mystique around it, you know, people didn’t really know what they were it was kind of an unusual approach. You know, trading your body At the highs of the day generally seemed like it seemed like a funny thing to do when you’re sitting on a spot desk. So, so there’s been more more embracing of quantitative strategies. And now obviously, we’ve shifted more even into, you know, more sophisticated quant strategies, but more machine learning things like that. So certainly there’s been an evolution there, I think, you know, but as we’ve been talking about here, you can say it’s as much I think stay the same, the more things change, the more things stay the same. Now we’re seeing bigger moves in markets, like we haven’t seen for a couple of decades, and, you know, people maybe aren’t prepared for that. People might be, you know, anticipating this, these kind of extreme moves in commodities and are scrambling to think about okay, well, if this is the case, if this is the new market order, how do we position for that?


Jeff Malec  25:55

Day one, which we’ll get into later, talking about your firm, but one big thing that changed is the ability to access it through. Right? Liquid? Yes,


Alan Dunne  26:03

rappers. Yeah, that’s true as well. Yeah.


Jeff Malec  26:11

So give us a quick bit on your background, and Abby and putting portfolio managers together. And we’ll dig into how all that works.


Alan Dunne  26:19

Yeah, so I spent just just shy of 10 years with Abby capital, which is a specialist allocator in the Managed futures, space, and great firm really enjoyed working with with the team there. And, you know, one of the, definitely one of the largest allocators into the space. And, you know, the philosophy there is obviously multi manager, you know, for, partially for what I’ve been talking about, like you have, you have the broad category of macro and manage your strategy. So all of the strategies that are trading in the futures and FX markets, and there’s lots of ways that of harvesting returns, and you know, in those markets, whether it’s trend following, and that can be short term, medium term, long term, there’s short term, systematic relative value trading, discretionary, macro, quant, macro, specialist, FX specialist commodity trading. So it’s all about trying to build portfolios that, you know, deliver that overall uncorrelated return profile relative to traditional assets. But also, you know, being cognizant of the fact that what you tend to see in this space is pretty large dispersion and performance. And, you know, low, low, low, low, low persistence. So what I mean by that is, you know, obviously, in any given year, you’ll have a widespread it between the winners and losers, but people who are top of the league table at any given year, you know, that tends to that tends to vary year to year, okay, you might see firms doing well, for a couple years in a row, and then the flip down the league table, and then they’ll make a resurgence. Why, because there’s something about their system that might have been favored by the market environment for a year or two, and then that changes, the challenge for investors is differentiating, you know, quite element of performance is just by chance, and just just been favored by the environment, and what element of performance is actually, you know, crew manager skill. So, so I think there is, you know, that there is a good case for diversifying within the space. And a lot of times I, you know, speaking to investors, people will say, you know, we don’t really like fund funds, we don’t like multi manager except in the managers and microskirt space, because you have that very high, high dispersion in performance. And it can be tricky to select one or two managers.


Jeff Malec  28:33

Do you think some of that problem with dispersion is just a categorization problem, right, like under the Manage features umbrella, so many different kinds of strategies, of course, you’re going to have this big dispersion.


Alan Dunne  28:45

Some of it is but not but even within like strategies, you’ll still get the dispersion. So even within trend following managers, if you look at say the sub 10, CTA, sorry, structuring trended and so 10 large trend following managers, you will still get, once you adjust onto a common volatility, trend, remember what the numbers are, but you know, it certainly certainly it could be the order of 40 percentage points in a given year, which is pretty substantial. And I think it comes back to the point that in winning trend following you have a lot of unique decisions to make as you construct a trend following program, you know, firstly, what markets are you going to trade? How you Alexon? Are you going to allocate the risk? And what timeframe, you know, is it short term, medium term, long term trends, you’re going to capture how you how you deal with volatility as we’ve been talking about, do you kind of target volatility or not how you risk manage how you risk managing a drawdown? So, you’ve got a lot of different levers that you can pull. And what that means is, you know, and even then breakout versus kind of more moving average type models. And all of these, well, you know, well, what you’ll tend to find is that the managers will by and large, be reasonably correlated. But being reasonably correlated doesn’t always translate into being very close in terms of actual performance. And so you know, if you take 2020, for example, you know, more breakout, so trading tended to do better in the first quarter. If you go back, you know, maybe, you know, back into the last decade, managers with more of a fixed income focus probably did better. If you went to the previous decade, managers with more of a commodity focus did better. And obviously, we’re seeing the more commodity focus managers having a resurgence recently, as well. But, you know, it’s easy to say now, oh, yeah, I want to be with the commodity managers. But go back five years ago, if you’re a manager with a heavy emphasis on trading grains, or agricultural commodities, it was really typical, you know, and pretty hard to make the case that, you know, things are going to change at some point in the future. So it’s all about saying, you know, the things work in a cycle, the world can change, what’s working today may not be what works tomorrow. So if you want to build a robust portfolio, it does make sense to diversify as much as possible. While all you know, all of the strategies have the same ultimate objective of delivering kind of an uncorrelated return stream, relative to traditional assets.


Jeff Malec  31:16

It’s amazing, like, was it just yesterday? Yeah, oil down, whatever, 20 bucks. Most all trend, we’re losing money there. Right. So it’s like, if you take any one little snapshot, they’re highly correlated off the same positions, and then can end the year, you know, 10 15% apart? So it’s right, exactly. Yeah. And then did you ever do any research on like, five year periods or 10 year period? Did the dispersion come in, the longer the timeframe?


Alan Dunne  31:42

And I think it may do, I mean, certainly you do have that element of, of, you know, mean reversion. But I think that the challenge with that is if you think about the cycle of allocation, that, you know, people might might, you know, you go and position a strategy to investor and say, Okay, look at the return profile of managed futures and trend following and say, Okay, that’s interesting. And then what to do, they go and pick a manager, you know, often they’ll say, Well, who’s been the best manager for the last three to five years and go with that manager, and then they’re reviewing that manager, three years later, oh, suddenly, that manager isn’t the best, but it’s then at the bottom of the table, and then it becomes a difficult one to defend to an investment committee, or a board or whatever it is. So And yes, that manager may then ultimately have to have a recovery. But at that stage, the investment has exited. So I think there’s a behavioral element to this that that you have to manage for. So So that’s that that is part of the reason for thinking about diversification in the space.


Jeff Malec  32:46

Yeah, the poster child for that, to me is the Wisdom Tree launch that he managed futures ETF and chose the Trader Vic index, which didn’t go short oil, launched in 2012, or something, because trade have been terrible. Yeah. And then, of course, what’s the next trend to happen? 2014 Oil crashes trend makes a bunch of money in short oil, and that their lifts sitting there without any gains? Yeah. Gotta be careful which manager you choose for? Sure. Absolutely. So what were some of the big names who dealt with them?


Alan Dunne  33:21

Like in Terminator, you know, Abby is a big, big allocator. So it’s pretty much all of the main, yeah, anybody who’s running a CGA would typically reach out to, to have a meeting. So it’s all of the big names to the smaller names, I mean, a lot, it’s some of it, it’s in the public domain. If you look at the IBM mutual funds, you’ll see managers like, you know, Graham, an aspect and Winton to, to FX specialist, like PE and, you know, managers like, you know, like Revolution in. So, so it’s the whole spectrum. And, you know, if you’re going to employ a multi manager, you got to expect the multi manager to be able to unearth some managers that you’re not going to, you know, do if you’re not focused on the space. So certainly, I think as a multi manager, part of the, of the, the role is is, you know, alerting interesting managers, part of it is the risk management and portfolio construction. And so, you know, that it’s not just a matter of looking at, you know, who’ve been there who’ve been the best performing managers for the last number of years, or who the blue chip names, there’s just there’s not there’s not as much value in that.


Jeff Malec  34:33

And Hard to believe, right, that Winton aspect. And I forget the third one, right, but all came out of that dorm room and Oxford.


Alan Dunne  34:42

That’s, yeah, it’s Yeah, yeah. So yeah. Yeah, I mean, that I mean, that’s, that’s one of the things you do see in the Managed futures spaces that a manager or a trader might have worked at a different shop and I’ve been influenced by the kind of trading philosophy there and then spins that and starts to run a portfolio See, I mean, you have seen that that kind of philosophy, you know, infiltrating a number of different firms over the years, in the same way like the turtle trading philosophy, that’s underpinned a number of different firms in the US. So, so those ideas do get passed along the way.


Jeff Malec  35:16

And then David Harding came out, right, was that two years ago, three years ago, and basically said, they’re not a CTA. We’re not right, stop doing this. Yeah, it seemed like it turned on a dime. Right. When he said that.


Alan Dunne  35:27

That was an interesting one. And I think it was, you know, it was probably unfortunate timing. And it was around 2018 2019. And it was, it was at a point in time where we were writing a research piece that was looking at the market environment for for trend following and looking at why trend following has been difficult. So there was a lot of people saying, you know, trend following, it doesn’t work anymore. It’s less attractive or too much money in the space. It’s got too crowded. And Winton’s, you know, David Harding was also seemed to be part of that, that that perspective that maybe the returns weren’t going to be as good going forward, I think it was maybe misconstrued a little bit in the sense that, you know, trend was still going to be a pretty, pretty decent part of their portfolio, it was a multi strap portfolio, but obviously not as much as it had been previously. So it wasn’t a case that there was a, you know, trend is dead. It’s just, maybe there might be other strategies with higher Sharpe ratios or more attractive features. But ultimately, it proved to be the that wasn’t the case, because you’ve seen a bit of a resurgence of trend following since then. So and


Jeff Malec  36:36

then didn’t they clap back to say no, now we are going back to?


Alan Dunne  36:40

That’s right. So that transition back to a slightly higher allocation to trend following. So that’s, I mean, that it’s interesting when you went to him, when you’re in the midst of that, it is a difficult thing to defend. And, you know, at that stage, I was doing a lot of defending and in client meetings saying it’s the market, it’s not something structural with with, with the strategy, it’s just that we haven’t seen big moves, we haven’t had these periods of volatility expansion, like we’re talking about, we had, you know, we had a measure that looked at the number of markets that were experiencing a one standard deviation move over the previous 12 months. And if you looked at that measure for the 55, major futures markets, I think at the end of 2018, there was one out of 55 markets, whereas in a normal good environment with kind of volatile markets, you’d expect it to be maybe 2530 markets might be experienced, and that kind of one standard deviation move. So we in that period was, and it wasn’t that there was no volatility. You remember, 2018, we had a volatility expansion volume again, and was in February of that year, but it was choppy markets that weren’t in markets, that sustained directional move. So often, people will construct a narrative based on something that seems you know, seems appealing, and a narrative at the time was, well, there’s a number of narratives. One was there’s too much money and trend following a seconder, as it was, maybe markets had changed, markets had got faster and trend followers were too slow to react. Another narrative was you had the growth of high frequency traders, and they were they were too nimble. And they were eating the lunch of these traders. And but you don’t hear anything about all of those arguments now with CTAs having a bumper year. So, you know, what does that say? It’s, you know, people construct narratives to justify or to try and explain things that they struggle to understand. And you know, it the reality is, it’s never one one or two simple things that are behind the the performance of, of the markets. It’s much more complex than that.


Jeff Malec  38:47

There was a piece I wrote once the the problem with alpha lacs beta, right? If it was easy to explain, it’d be beta. And you could just say, this is why this happened. Right? Yeah. And you left one out of right, the big complaint was central banks and intervention. And that’s all sampling volatility. So that’s what it sounds like your take is none of that was really true, or some of it was true. But it’s such a mixture. It’s hard to pinpoint.


Alan Dunne  39:12

I think possibly, I think certainly, what sort of a macro volatility could have been a part of it in, in the sense that we didn’t see big variations in the macro backdrop, you know, GDP was slow and steady, inflation was low. You know, when you get booms and busts in the macro cycle, then that translates into, you know, more or less demand for commodities. So that’s the macro side. The second thing is obviously you have idiosyncratic events like we’re seeing now. And arguably, we had less of those in that period. And


Jeff Malec  39:47

it’s like it just had a smaller opportunity set. why that is?


Alan Dunne  39:51

Certainly the opportunity set was smaller, I would say for sure. I think the Central Bank One was interesting because it certainly did you know at times it seemed to be correct you have in terms of dampening volatility, but at the same time, we did see some big moves, say in 2014, and currencies, with the Euro selling off. And that was at least somewhat linked to the European Central Bank, monetary policy. So, it can be, you know, there can be it can be, you know, seductive to say, well, that’s the reason for why that’s happening, you know, but in reality, it can be more complex, I would say, but I think, you know, at a simple level, the way to think about is, are we seeing their big directional moves on a sustained, multi week, multi month? time horizon? Yes, we are at the moment. No, we didn’t see it to the same extent back then for whatever reason.


Jeff Malec  40:47

Going back, how many meetings would you take a year? How many managers? Would you analyze? And do the due diligence on?


Alan Dunne  40:52

Yeah, I mean, literally hundreds, you know, a lot would depend on if you go to a couple of conferences like context, eye connections, MFA, those types of events, you could, you could definitely do, you know, 5060 manager meetings over a couple of days. So if you have a number of those in the calendar, then you’re going to ramp up your your kind of manager connections into the hundreds. And so, you know, I think I think it’s definitely part of the part of the scale part of what we should do, I would say, I’ll give I’ll give our top traders unplugged allocator series, a plug here, that said, recently, I was talking to Chris shelling recently, from venturi Weldon, he was making that point as an allocator. In the question, I was posting to him, how do you get better at your diligence? And he was just saying, it’s just repetition. You know, if you if you just met one CTA ever, you know, as an investor, you say, well, that’s really interesting. But you know, if you bet 100, or a number of hundreds, and is okay, it’s, it’s interesting, but I, I know, another 100 managers who do this, so is this guy better or worse. So, I think there is a lot to be said, for meeting a lot of managers. And, you know, and it is interesting, because people, people in the in the industry, you meet a lot of very impressive people, and it’s a very tough competitive industry. So you can be really high quality, but still just be, you know, middle of the pack in terms of of the industry performance, or assets, or whatever it is. So it’s I think, I think meaning a lot of managers. It’s not just a reputation, you know, it is, you know, it’s called Full reflection on what your, what your, what you’re learning from the managers as well. And I think I think experience and perspective is helpful to you know, because you’ll always think back of Oh, yeah. Somebody have asked you about that manager, you say, oh, yeah, remember that thing they did with their system that year, and I didn’t really like it. And, you know, it’s always in the back of your mind. Whereas that’s not something that you’ve just looked at, you know, 10 years of monthly returns, it won’t jump out, it’s but that’s what you learn from those kind of weekend week, I’ve set engagements with the manager, and that’s where the value is.


Jeff Malec  42:56

Any good stories, like a guy showed up without pants on or anything to me. I’m thinking that Will Smith movie pursuit of happiness?


Alan Dunne  43:05

No, I mean, I’m trying to think I mean, you do you meet lots of interesting characters. It’s when you go to these events, and people are, you know, you get all manner of backgrounds, whether it’s quants, or macro people are. And not not everybody is the most, you know, socially adapted presenting and all of that. But, you know, no meetings to report where people have showed up for that or close on


Jeff Malec  43:32

that? And how about what, what are some of the screw ups guys do that? Where it’s like, oh, you should have done that better? Right? Like, what are some of the table stakes for managers out there emerging? Guys? What are some of the things you need to make sure you do when you’re meeting with a group like that?


Alan Dunne  43:47

I think, you know, you got to you got to show that you’re competent and savvy and thoughtful. You know, sometimes people say, Oh, look, I’ve we’ve done the back test, and it’s got a great Sharpe and, you know, we’re running at 50 involve, and we don’t expect to draw down to be less than 10%, or whatever, as an allocator. You’re saying this just doesn’t seem feasible. We’ve never seen strategies like that before. So it’s probably not the case that this is going to be the first. So I think you have to be realistic. You know, if I heard if I hear that, somebody’s saying that to me and say, okay, these guys are probably probably have over optimized their their system, and they’re not really that savvy. And that would be, you know, to carry a flag. I think, you know, there are other practical things that people just overlook, you know, sometimes certain allocators just don’t turn over their portfolio very frequently. So there’s not a lot of opportunity to add new managers, it doesn’t mean that you’re a poor manager, just because you’re not getting an allocation. It’s just there might be only one or two slots in that year, and there’s maybe 100 200 potential managers. So sometimes people seem to get a little bit disillusioned and you don’t hear from I’m a manager for a couple of years when, you know, all you can do, really, as a manager is to engage, you know, keep keep the allocator updated from a performance perspective. And if the opportunity arises, and if the opportunity is right, then things might fall into place. So I think it’s doing the basics is an important, important part of it. And but certainly, you know, being being realistic in the in the return and volatility profile, and how that’s presented, is important to consistency is important as well, you know, if it’s something that has changed a lot over the years, then that’s going to be a more difficult story. Whereas if it’s fairly consistent, okay, great, you want to see evolution, you want to see research, but you don’t want a system that went from being trained to short term to something else, you know, multiple iterations of the same thing over time. So lack of consistency would would be a bit of a flag to


Jeff Malec  45:53

two things to unpack there. So one, how do you approach it? How do you view like, this needs to come out of the portfolio, right? So all this good due diligence, all this stuff to get them into the portfolio? When you say, this isn’t working, you’re coming out? Especially when you could have five years of flat? That’s no fault of the manager, like we talked about?


Alan Dunne  46:12

No, absolutely. And I think what you have to ask yourself is this outside of expectations, and outside of, you know, statistical expectation. So you can have a period of underperformance. And obviously, it may be just by chance, or it may be that the markets haven’t been as conducive. So I think there are things you can do to address that, you know, obviously, if you look into the pattern of performance, and look at the market, so, you know, the classic example, if you’re a trend follower, you know, more commodity focus, trading the eggs, maybe, and those markets hasn’t been good from a trend following perspective, well, then, you know, unless you’re taking the strategic view, and that the eggs will continue to be difficult, you have no reason to remove that manager from the portfolio. I think I think there are things that are obvious, you know, reasons for reassessing, you know, III believe that that’s one thing. And I think that if the pattern of performance is different to expectations, you know, so for example, if you have allocated to a manager, you know, on the expectation that we will do well, in a period of rising volatility, okay, if low, if you have low volatility, and they’ve underperformed fine, then you get that period of volatility expansion and they’re still underperform, well, then that’s, that’s something about the pattern of performance that’s outside of your expectations that you would have to review. Equally, you can have something, you know, positive, that’s outside of your expectations. And in terms of the pattern of performance, that there could be a reason for, for reviewing the manager. So, you know, obviously, if you allocate via manager can’t, you’ll get a lot more information, post allocation, and you’ll learn a lot more about the manager. So you may learn something in that situation that you didn’t realize in terms of maybe their growth exposure, or you know, how quick they are to manage to increase or scale back risk. So you could, in theory, you know, learn something at that stage, that you hadn’t realized that at the point of allocation that might prompt you to either resize the allocation or maybe even remove the manager.


Jeff Malec  48:07

But in general, sounds like you’d be extremely slow to fire a manager unless something way outside the box.


Alan Dunne  48:13

There’s different ways of approaching this. And there’s no right there. Obviously, there’s the there is the model, which seems to be the case of the big kind of multi strat firms have given traders that certain amount of p&l, you know, and then you’re out, and you’re out. And that that does seem you know, it does, it’s not a kind of a statistical approach, it’s more of it, okay, let’s find the things that are working well in the markets at the moment and go with those, you can take them this statistical approaches, and you do a lot of due diligence ahead of time and say, Okay, we think there’s an alpha here, we think there’s a return series, that’s interesting. But obviously, it’s going to be variable over time. So it doesn’t make sense to remove it, just because the six month or one year drawdown, you have to have the, you have to size it correctly in the portfolio. So I think if you think that that statistical approach, you have to have the ability to stick with managers through ups and downs, and, you know, obviously, you have performance fees in the industry, so you don’t want to be exiting managers and giving up negative accrued incentive fees. So I mean, basically, what that means is that you have to be able to find managers that are, you know, even better than the ones you’ve got in your portfolio. And if you’re going to remove a manager and give up that kind of negative a good incentive fee, so I think, you know, that seems


Jeff Malec  49:25

like a little bit of a perverse incentive, right, like we have we have built up


Alan Dunne  49:30

is a bit of a perverse incentive. It is yeah, but I mean, it I mean, that’s, that shouldn’t be a criteria by itself, but it does tip you know, tip the odds slightly in that managers favor because they’ll say, for the manager who you’re entering at a high watermark, you’re going to be paying more for that manager. So kind of an like for like basis. And you have to have a good reason for believing that the second manager is going to be going to outperform and, and you know, There’s a natural temptation to think they will, because they’re probably a manager that had been doing better recently, relative to the guy that’s been underperforming. But but as we know, these things move in total. So it’s, it’s, I think the overall lesson is to try and be, you know, to try and think statistically as much as possible, as opposed to, you know, I think there’s a temptation, I’m in the process of writing a paper on this, I’m going to put it out in the next couple of weeks and behavioral biases. And in manager selection, there’s a tendency to say, you know, to start and to see good performance, and to justify it and generate a narrative around the good performance, rather than see performance and say, well, let’s assume that just due to chance, and try and disprove that hypothesis, that it’s due to chance, you know, if you take that mindset, you’re going to be a lot more skeptical of the narrative and a lot more questioning of, well, does this manager really have a skill relative to other managers?


Jeff Malec  50:59

And what sort of heuristics do you have for that as well of like, Alright, I’m gonna allocate to this manager, they’ve had a 20% max drawdown, I’m gonna let it go one and a half that to x, that having


Alan Dunne  51:13

I mean, it, people will have different ones, but generally, you know, you should expect to draw down of, you know, two times the evolve, over over say, say, a 10 year period as a kind of a benchmark. And in rough terms, I mean, it probably be a little bit more than that. But But But But yeah, so so. So, it’s not just that, I mean, I think it’s important to have that stop loss, but it’s also about the pattern of performance and what you’re learning about the pattern of performance as you’re allocated to the manager.


Jeff Malec  51:44

And then on the flip side of all this, the emerging manager, how do you think about the emerging manager, someone with a very short track record? Yeah, what are your thoughts?


Alan Dunne  51:54

Yeah, I think the emerging managers are difficult, you know, it is, it is difficult, because sometimes, you know, manager has been in a larger shop, or they might have been you traded at a bank, or whatever it is, and either transitioning into a slightly different environment, and maybe they traded a portion of a book elsewhere. So you know, you have to get get certainty that what you’re looking at, in terms of the of the, of the return series is going to be on a like, for like basis. And, you know, there might be reasons for believing that, that won’t be the case. And so I think emerging managers are more difficult, obviously, smaller managers, you know, more nimble, less capacity constrained so that they can access certain opportunities that that larger managers may not be able to access, certainly interesting from that perspective, but you are taking a different type of risk there. Sometimes, you know, there might be the sense that people are always looking for, Okay, who’s next manager, who’s next manager, when there might be a guy there with a 15 year track record, okay. The Sharpe might not be anything, you know, off the charts. But you know, a manager who has proved that they can do that over 1520 years, whatever it is, but consistency of approach, that can still be very valuable in a portfolio context.


Jeff Malec  53:13

And to me, like that manager, you can see all their words, right? Like, the other manager has hidden words that you’re gonna find out about.


Alan Dunne  53:21

Yeah. And even, you know, even two to three years is relatively short period of time to evaluate a pleasure. Because, you know, you know, the two to three years, say, between 20 2016 and 2019, are very different to the three years we’ve had in the last three years. So different market environments could just favorite strategy. And so that’s why I think there’s definitely a strong marriage to be able to see, you know, 10 years plus of data, it’s not always the case, certainly five years is a good, a good benchmark to have, but but more my philosophy would be more data is better for sure.


Jeff Malec  53:55

Yeah. And then more assets better for sure, too, because every emerging guy hates to hear the, oh, we’d love to allocate you, but we can’t be more than 10%. And you we only do $10 million allocations. Is that a, just a brush off? Or is that real?


Alan Dunne  54:09

I think it depends. It can be the case for some people. I mean, if you’re using managed accounts, it’s not necessarily the case. I mean, it can be just institutional constraints for certain allocators. And it shouldn’t necessarily be the case. You know, if it’s more, you know, it’s good to have the appropriate infrastructure or didn’t have the risk controls all of that stuff. And I don’t see why people should be too worried about being more than a certain percent of affirm assets. I mean, okay, maybe there might be, you know, with early stage managers, if you’re investing early in a fund and you’re creating more of the fund fees, then that that can be an issue but if it’s a manager candidate, it shouldn’t really be be an issue.


Jeff Malec  54:58

All right, moving on. Next archive. Tell us Yes. Yes. Tell us what you’re doing at archive. Yeah. How’d you come up with the name? I like


Alan Dunne  55:11

you? Well, you know, when you start a new firm, you know, you, you kind of, kind of mull it over for weeks and procrastinate and, you know, ask everybody, what do you think it’s a good name and all of that. And, you know, I was reading and the Stephen Schwarzman Blackstone’s book, and he was talking about how they name their, their firm, and I think his partner was married marriage to the lady who came up, but Sesame Street, you know, and she was saying, Don’t worry about the name, because, you know, we started this program, Sesame Street, it was never even a street called Sesame Street. You know, if you’re successful people remember the name? If you’re not, it won’t matter. So, so long story, their archive, it just came to me, it was diverted to something else. Oh, yeah, maybe that’s a good one. Because, you know, I always liked the idea of looking back into the past, for clues to the future, you know, and, certainly, that’s in the, in the kind of the whole CTA approach of, you know, looking at the past, to see performance, but But more than that, just looking at past episodes of history, and effectively looking at archives for clues to feature so, so that was it. And so as I say, I was with the for 10 years to start, you know, I wanted to spend I do something myself, and obviously, my skills and expertise is in this area, within manage features, macro, you know, all my experience going back to, to the 90s. I started off in FX and as an FX Trader and analysts, and then as an as a macro strategist. So what I’m doing is working with, with investors, specifically wealth managers, small asset managers, people who have an interest in accessing the space, but definitely, but don’t necessarily have the expertise in evaluating managers or in portfolio construction and in space. And so, so looking to work with those types of entities, either in terms of assisting a manager selection and manager insights, and portfolio construction as well. So part of my motivation for doing it was, you know, looking at the world, I felt, you know, us in the manager space, were always saying, oh, yeah, look, it’s good. But I really felt that, you know, there was an interesting opportunity, where we are now everybody’s saying the 6040 is dead, but what is the alternative to it? And I, you know, the markets have actually been, you know, you couldn’t have said that the markets would have been this good for these types of strategies a year to go, but But I do think that we’re into an environment, which will be favorable. And I do think that there will be demand for these types of strategies. So I think it’s a good time to be starting a firm in this space.


Jeff Malec  57:50

Was it driven by MEB, Faber tweet of, he was like, I’m dying for some newsletter service, I’d pay big money for it to give me like, here’s, here’s what you need to be looking at it in this space?


Alan Dunne  58:02

I haven’t seen that. Actually. I’ll try and pick that


Jeff Malec  58:04

up for you. And it’s mainly you’re dealing for now in liquid.


Alan Dunne  58:10

Yeah, I mean, it’s it’s it’s everything in this area, you know, whether it’s macro discretionary quant managed futures, trend, short term, volatility, trading commodities, currencies. So all of that in the liquid space, is where we’re where my background is. And, yeah, it’s been a space that, you know, as we’ve been saying, has gone through ups and downs over the last decade, but but we’re into a better period now. And I do think the outlook is good for, for the coming years. And, yeah, I think if, you know, I’m obviously based in Dublin, here, looking across Europe, in particular, if there’s a lot of money invested in kind of asset allocation models, multi asset models, and really, a lot of these strategies are very underrepresented in a lot of portfolios. And, you know, I remember I went to a CFA investment workshop in Harvard a couple years ago, and, you know, really, really interesting event, you know, you meet a lot of interesting people in the industry, and here, lots of high quality speakers from from Harvard, but But it struck me, you know, engaging with a period group of, you know, 4050 investors from around the world, a lot of people still weren’t that familiar with, with the space, you know, so I do think that there’s, you know, there’s a an untapped opportunity there over time to to educate more and more people on on the macro and manage future space.


Jeff Malec  59:33

Right. It’s like I’ve been doing blog posts on men’s futures for 15 years, people come on. And then it Sorry, I keep coming back to liquid so you’re talking you say it’s mutual funds and ETFs on the USN? Yeah,


Alan Dunne  59:47

I mean, not not just I use the term liquid alternatives with some people and it’s funny, from my mind, it’s just that the strategies themselves are I think, from a US perspective, liquid oil automatically means mutual funds. I mean, private placement, managed accounts, you know, whatever it is, the vehicle is less, less less important as more just the strategies I’m talking about.


Jeff Malec  1:00:11

And what how do you view that space over in Europe? It seems the usage rappers a little more constructive than the mutual fund rapper, some of these strategies probably can’t get fully what they want done in that wrapper.


Alan Dunne  1:00:23

Yeah, it seems to be I mean, there’s there are a number of trend following managers you can access in any use its format. Some of them have commodities, some don’t. And you know, the quant macro space is fairly constrained. So I would say the use its set of strategies isn’t very extensive. There are some and you can access, you know, alternative investment funds or kind of like private placement type funds, but in a European regulated structures, that’s a that can be interesting. For some people person, I think there’s an evolution, the whole use its wrapper, it ebbs and flows a little bit. You know, for some people, it’s all use, it’s all use it and then you read well, some people are saying, Well, okay, maybe, maybe I would rather have a an offshore fund or a an alternative fund to have the fully unconstrained version of the strategy, rather than having a slightly more constrained strategy within the use it. So it does tend to kind of ebb and flow a bit. And who knows, maybe maybe the regulations will change over time again.


Jeff Malec  1:01:27

And then lastly, how do you like CO hosting or guest hosting? What do you call it on top traders unplugged?


Alan Dunne  1:01:33

Yeah, it’s been great. I mean, I’d never done any podcasting before. So really great to get the opportunity. So Niels Castro Larson invited me on, you know, sort of this year, I’ve done a couple with him. And then he’s invited me to do this allocator series, I’m speaking to CIOs and other allocators. So that’s been really interesting. And, you know, one of the upsides or downsides, a lot of the people I’ve interviewed have their own books. So I’ve had to go and SWAT up and what they’ve been writing about before, before I’ve interviewed them, so that’s been that’s forced me to do that. But, ya know, it’s interesting. I mean, it’s interesting, speaking to a lot of the investors about the kind of the non investing challenges as well, you know, speaking to people like Sebastian page runs multi asset or tiro price. And, you know, a lot of his focus is on leadership and building teams are speaking to Elizabeth Burton at Hawaii. And again, you think the CIO role is all about making the big calls that the markets are going and so occasion, but then there’s this other element of managing people and understand the whole, you know, the behavioral side of things keeps coming back, how do you cultivate a behavioral edge, which is all about, you know, how do you put the right processes in place in place to try and avoid the mistakes of, you know, selling that manager just because it’s a brief drawdown as opposed to something structural? So, so it is interesting, it’s the same challenges for everybody. But interesting to hear it from from big allocators to get their perspective on what’s what’s what’s interesting. You know, I think the, what what you definitely hear is, is, you know, more interesting, also, we, you know, we’re probably biased with some of the people we pick, but certainly, you know, there’s certainly that strong sense of that, that will that certainly the 40 side of the 6040 may may see more, more infiltration, which would also return


Jeff Malec  1:03:35

the get my brand going like, do you see that some of these big allocators make the same mistakes, it’s like a small family office or a right, it seems like the larger the bankroll doesn’t necessarily mean the more sophistication.


Alan Dunne  1:03:46

No, I think it’s true. I mean, that’s, that’s, that’s been my experience. And in, you know, on the institutional asset management, so to the tank, it’s, you know, people won’t make those mistakes. But one of the things, you know, I think about is everybody reads about behavioral biases, and says, Oh, yeah, I can see how other people have that and identify these things. But it’s really hard in the moment of making the decision. So we’re having a discussion about the manager not to have some kind of bias, influencing your opinion about them. So it is, it is really hard, regardless of whether you’re a retail trader or individual investor or a large institution, I think the best thing you can do is to be probably more process driven, which some institutions will be and the risk with that is it becomes more box ticking. Yeah. So I think it’s a really it’s a really tricky balance to try and to, to to be cognizant of those biases, but not just be to process and rigid in your structures.


Jeff Malec  1:04:50

Right. What’s the Jason Buck would say the art versus science, right? Like there’s an art to it that you can’t just process progressively. Yeah, No, for sure. And then it’s odd to me that they have these, you’d think, isolate that person, keep them out of the HR and all the people business and just let their brain work on the allocations, right, that’s interesting that they’re dealing with all that side of the business.


Alan Dunne  1:05:13

Well, it’s true, it’s a classic scenario, you know, the guy who’s good at trading miss, won’t necessarily be a good trading manager are the same, same from an investment perspective, or a research perspective. So yeah, I don’t know, it’s kind of think, you know, my own experience, I witness both sides of it, some some good people, managers who weren’t necessarily, you know, strong, you know, there’s really strong investment backgrounds, and that did work well. And so I think it’s, um, you know, speaking to some of the managers or some of the guests, it’s certainly something that has been a challenge for them that they’ve actually actively had to work on. And, you know, because they probably come from more, more of having a kind of a trading or investing skill background, you know?


Jeff Malec  1:06:04

Alright, we’re gonna finish up with our what would you invest in segment? Give you a few levels? So you got 10k? That’s all you got? What were you putting?



Alan Dunne  1:06:16

I think if you’ve got 10k, obviously, you know, you’re looking for something speculative. So yeah, I’m not a, I’ve done a little bit of VC investing. And it’s something that I’m kind of getting more interested in. And so I would say, certainly on the pick something from a VC perspective, obviously, digital assets as a space at the moment, but I’m not I’m not really a crypto fan. I haven’t been to date. But I do think there may be interesting opportunities in the whole infrastructure side of things. So. So that could be something from a speculative, speculative perspective


Jeff Malec  1:06:51

100k, you’re going up to 100k? Where’s that going?


Alan Dunne  1:06:55

I think once you get up to 100, to kind of million levels, then you’re getting into more typical kind of investing and asset allocation. So obviously, I’ll talk my you know, I do think we’re into an environment of, you know, more difficult for financial assets, probably higher inflation over time, and possibly, you know, financial repression. So, more negative on financial assets, more positive on real assets, and trading strategies that are favored by that. So that includes everything from, you know, obviously, my own, you know, wouldn’t dissuade anybody putting 100k into trend following or macro. But equally farmland, I think is interesting. And real assets, like that are going to stand up over the next the next decade or so.


Jeff Malec  1:07:46

And then you sort of wrapped a million into their SWAT will jump all the way up to 100 million


Alan Dunne  1:07:50

100 million CZ, if you’ve 100 million call archive capital, and we’ll construct something for you.


Jeff Malec  1:07:56

But don’t you want to still have some portion in equities? But right, you’re gonna think


Alan Dunne  1:08:01

I think one of the things that that that’s also interesting that you’re getting more that that’s kind of common on radar to a greater extent is the use. So the use of futures for equity for beta as well, and combining and alternatives with futures beta. So that’s something that we’re starting to see more in the market. I think that’s interesting. And that could be something for somebody with the, with the 100k, or the 1 million as well. So and yeah, I, I’ll say the 100 million, I think you’re talking into institutional portfolio, you’re looking at a multi strata multi stress portfolio in this space.


Jeff Malec  1:08:44

And then I’ll flip that a little bit. So with my that 100 million, what’s the proper? And it’s obviously all depends on the person in the client, but what’s your range for how much should be allocated to macro futures type strategies?



Alan Dunne  1:08:58

Yeah, I think like, yeah, it’s as I’ve been saying at the outset, it’s about harvesting different approaches to trading the market. So I think you can definitely have a really nice portfolio diversified across price price trend following you know, economic trend following or quant macro coupled with you know, the other strategies in the space so, you know, volatility trading, and systematic relative value as well. And then looking at opportunities under discretionary side, whether it’s more commodity focus or more traditional macro, so I do think and, you know, it probably hasn’t been involved for a while but it sounds like investors are warming to this too much greater said obviously a lot of flows have gone into the into the large muddy straits and that’s a slightly different approach. But I do think, you know, for diversified macro portfolios are interesting, and when I say macro, I’m including managed futures within that.


Jeff Malec  1:09:59

Bye But 5% Right, like, there’s a point where doesn’t even do anything for you. Oh,


Alan Dunne  1:10:04

you mean it within your overall portfolio? Yeah, yeah, yeah. Yeah. Yeah. I mean, I would I would be thinking more like 20%. Right. Yeah. Yeah. So if you’re thinking about your 6040 portfolio, and you’re really looking at the 40 side, and you know, what’s the best way to manage that?


Jeff Malec  1:10:24

Let’s go to 40.


Alan Dunne  1:10:25

Why not just go to 40? Yeah, possibly. Some people will, will want something maybe for more from an income perspective. And there are other strategies out there. But yeah, maybe let’s go to 40 or we’re not. And then let’s go for it. Let’s go above 100. And he’s just for leverage. And then you get it gets very interesting.


Jeff Malec  1:10:42

Definitely. And I think that’s the mistake we see a lot of institutional allocators make and, you know, family offices of like, I’m going to try all this and do 5%. Yeah. Doesn’t doesn’t do anything. It’s not going to move the needle one way or the other. Absolutely. All right. Any last thoughts before we leave it? Where can we find out about archive? What’s the web?


Alan Dunne  1:11:01

Yeah, it’s archive And, and you’ll see find me on LinkedIn as well. I do posts a little bit I maintain, starting to warm up a little bit on Twitter. I’ve been off the base on Twitter,


Jeff Malec  1:11:15

right, come on, but in the waters the waters fine.


Alan Dunne  1:11:19

And, yeah, obviously I’m hosting co hosting a bit on top traders unplugged the allocator series is there. It’s talking to CIOs and allocators, so that’s interesting. So check the dice.


Jeff Malec  1:11:31

It’s great. You want to come be guest hosts here sometime. Yeah, certainly open to us. Yeah. Done. If you can get David Harding. We’ll do it. We’ll do it. And I forgot to say on Happy St. Patty’s Day Go Go Green bear for me.


Alan Dunne  1:11:45

Don’t have a point there. Thanks a million. Yeah,


Jeff Malec  1:11:47

do they do green bear in Ireland or that’s passe? Don’t know. There’s none of that. It’s


Alan Dunne  1:11:51

Chicago. The deliberate speed? No, no, no Green Berets. It’s it’s black and white. Guinness.


Jeff Malec  1:11:59

Right. If you can turn your beard green. It’s probably not a true Irish beer. Right. It’s it’s a little too light. Probably not when you want to drink. Alright, Alan, this been fun. Thanks so much. I don’t know what time it is over there. Time for dinner.


Alan Dunne  1:12:13

Coming up to dinner time. Yeah. All right.


Jeff Malec  1:12:15

We’ll talk


Alan Dunne  1:12:16

to you soon. All right. Thanks a lot, Jeff. Thank you.

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