Risk Confusion

My post here brought in this comment:

Michael: I have been in discussions with [trend following trader] Mulvaney Capital Management since the summer for a company in which I was the C.O.O. The board thought my ideas were too risky and that I tried to hit too many home runs [by hiring Mulvaney]. This particular concern [firm I was with] lost 30 million dollars in September and October. I showed them the Mulvaney performance: 15 million invested in 1999 equated to 71 million today and 30 million over the same period equated to 142 million. After my presentation at a board meeting I returned to my office and was told the next week that I was being eliminated as I was too big a risk taker. My only other investment in my short tenure was with Abraham Trading Co. and the returns equated to nearly positive 12% for the same time period – this was the only positive investment for the org. over that period. So much for my risk taking. Mulvaney is more of a risk oriented firm but they appear smart from a risk management perspective. Great books and web articles. Len

Thanks Len. Great story. Logically it will be difficult for many of these types to keep saying trend following is risky, especially in the face of ‘leveraged long only buy and hold’ approaches that cratered, but then again who said most of Wall Street (what’s left of it) was logical.

3 thoughts on “Risk Confusion

  1. you should not point out to them that their way is inferior — they don’t want to hear it…..out you go..

  2. During my brief tenure at a Fund of Funds I was assigned due diligence on managed futures funds and my research brought up Abraham Trading among a couple other mostly global trend following managers.

    The result. It didn’t take long for the research to be forgotten even though I was able to show that the manager volatility tends greatly toward the upside, not the downside.

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