George Crapple: Trend Following Trader

George Crapple of trend follower Millburn Ridgefield offered wisdom in a Barclay Group publication:

“A futures fund traditionally invests its underlying assets in Treasury securities, some of which are deposited as collateral or margin for futures and forward positions. These positions typically have a face value of three to seven times the net asset value of the fund as in the case of Millburn Ridgefield Corporation’s funds. The substitution of individual equities for a portion of the underlying Treasury bill asset base would reduce the non-correlation of managed futures with equities, unless the manager adopted a methodology of hedging the equity exposure in bear markets. Regardless of the level of substitution of equities for Treasury bills, the leverage in a futures portfolio will still make the portfolio substantially managed futures, and the arguments for including such a strategy in a total portfolio remain intact. Since investors often look at each of their investments on a stand alone basis as well as on the basis of what they contribute to an overall portfolio, the inclusion of some equities in a futures portfolio can enhance rate of return and, in many situations, reduce volatility due to the non-correlation of the strategies.”