Tim Pickering – Riding Auspicious Commodity Trends
In this episode, I talk with Tim Pickering. Tim is the founder, President and CIO of Auspice.
Auspice Capital Advisors is a quantitative investment specialist focused on Alpha and Enhanced Beta managed futures and commodity strategies. Auspice specializes in applying innovative rules-based investment strategies across a broad range of commodity and financial markets.
Auspice’s flagship alpha strategy is the Auspice Diversified Program with 15+ years of track record and winner of the 2011 Silver Medal by Morningstar in the category of Best Opportunistic Hedge Fund and top performing CTA in Canada in 2008. The strategy was named the top performing CTA strategy globally by the Altegris CTA Challenge for its 2014 risk-adjusted performance.
Prior to forming Auspice, Tim was VP of Trading at Shell (North America). He began his career at TD Securities (Toronto) in their elite trading development program ultimately holding the Senior PM position for the Energy Derivatives portfolio. Outside of Auspice, Tim has been involved in grain farming in Western Canada.
Through the founding of Auspice, Tim ties together a career in commodity and financial risk and portfolio management that has spanned institutional experience along with entrepreneurial vision.
Tim and I talk about his history as an institutional energy trader and how that lead him to want to start his own entrepreneurial venture. We touch on where inflation manifests itself and how do you make sure you are there. We also discuss how to deal with open profits within a trend system.
I hope you enjoy this conversation with Tim as much as I did…
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Have comments about the show, or ideas for things you’d like Taylor and Jason to discuss in future episodes? We’d love to hear from you at info@mutinyfund.com.
Transcript for Episode 27:
Taylor Pearson:
Hello and welcome. This is the Mutiny Investing Podcast. This podcast features long form conversations on topics relating to investing, markets, risk, volatility, and complex systems.
Disclaimer:
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Jason Buck:
This is Jason Buck from The Mutiny Fund, and it’s my pleasure to sit down today with Tim Pickering of Auspice Capital, where they’re a quantitative multi-strat CTA firm, and we’re going to get into what all those words mean, hopefully in this discussion. But let’s start off, Tim with, I always am fascinated by naming, particularly because I know how difficult it is to name something and I know all names are usually taken.
Jason Buck:
So trying to find a name that exemplifies your firm that you’re happy with is extremely difficult. So where does the name Auspice come from?
Tim Pickering:
Well, a couple of words that I wanted to use were taken, so I landed on this one, which had a similar meaning, and that was the word auspicious that comes up in conversation, but really a sign of good things to come, but also has elements of protection or support within the definition. So that’s the name I came up with, it just seemed to fit where I was at when I was leaving institutional trading and wanting to start this firm. That was the spirit of it and I think that’s the spirit of what we’re trying to do as a CTA, provide non-correlated returns and protection for a portfolio in that kind of a support role.
Tim Pickering:
So I came up with the name, the logo which is an endless knot was actually… Almost a more interesting part of this story, my business partner, Ken Corner, and by the way, Ken and I have now traded together for 20 years up until November of 2020, 20 years now. He came up with the endless not, which was a coincidence. He had been over in Tibet and had seen this endless knot and it’s one of the eight auspicious symbols in Tibetan Buddhism. And it actually symbolizes the union of wisdom and method.
Tim Pickering:
So that was it, he’s like, he’d seen this thing and I had this name and it was a coincidence. And we actually have the endless knot burned into a piece of wood that was done with a magnifying glass by some villager in Tibet that can track down. Yeah, we take some pride in our name. Most people don’t ask, so thanks for asking.
Jason Buck:
Well, that’s all the mythology, is you want auspicious start, you start with auspicious naming, and you started with going really direct to the source.
Tim Pickering:
Right.
Jason Buck:
And I know how good it probably felt when you found that endless knot logo. That epiphany had to be fantastic, is like, couldn’t be perfect, it couldn’t be more perfect.
Tim Pickering:
No, that was it, that’s the name. We’ve got it for sure. The funny part of the name is, and we can get into the bit of the history, but we now have a private equity partner in Auspice. They bought into the firm 25% last year, a group out of Montreal, Canada, and obviously a French background. And the word auspice does not work well [foreign language 00:04:20] because it sounds like hospice, which is a place for people to die.
Tim Pickering:
So there’s been many a joke about our name within that firm, but we have a wonderful relationship with them, so it’s just a side joke all the time.
Jason Buck:
Nice. One of the other things I said in the intro is you’re a multi-strategy firm. So can you just tell me briefly, what are the different strategies that you guys employ?
Tim Pickering:
Yeah, sure. We started with what we call Auspice Diversified, which is our multi-strat CTA focused on trend-following, not exclusively. We do serve some non trend stuff in there, but the bulk of the risk, call it two thirds plus is trend. That’s the fund we started with when we started this firm, so over 15 years of track record starting in late 2006. And from that we branched out, and what happened in our history is, the thing we did after launching Auspice Diversified is we partnered with an ETF company called Claymore.
Tim Pickering:
And Claymore was looking to add commodities, things like managed futures and that type of exposure to their product suite. They had a very innovative leader, Som Seif, who’s still in the business. He runs a company called Purpose, which is highly regarded. And what we did first was we launched a natural gas-based ETF in 2008. And at the time, think back to 2008, natural gas was the Bitcoin of the time.
Tim Pickering:
It was extremely volatile and it was a new and exciting thing for, especially retail investors to gain access to. And the whole ETF path taught us a few things and it leads to the rest of our product suite, but it taught us about indexing. The bulk of the world’s assets are still indexed in some regards, and you need an underlying index to reference with an ETF. So how do we create an index that creates the exposure we want to physical natural gas? How do we go about that? So it was a bunch of learning lessons.
Tim Pickering:
We learned about indexing, we learned about ETFs. Why I tell you that story is it led to branching out of our product suite. So from Auspice Diversified, it’s this melting pot of strategies, what are the strategies that would be attractive to certain types of investors? And so the second big area is what we call our Broad Commodity strategy. And so it’s a long flat approach to commodities with a longer commodity or without an exposure, flat. And the idea was to give investors upside to commodity movement, but limit the downside that’s readily apparent from time to time.
Tim Pickering:
And we’d just gone through a very negative commodity cycle up until about the last year, year and a half. So how do you control that downside? The common way to gain commodity exposure for many investors, including institutional investors is go buy something, went to the GSCI or the BCOM. And that’s great, you get this widespread commodity exposure, but if commodities go to the tank, you lose a lot of your money. How do we control that downside?
Tim Pickering:
So it was blending in CTA style trend-following across this basket of commodities, more not long everything. We’re moving maybe long a commodity based on its merit if it’s got momentum and we may be in cash on that commodity. And so CTA-based trend-following, volatility-based position sizing and resizing, and in term structure, where do you want to be long on the forward curve of futures contracts?
Tim Pickering:
That was the second product, was the Broad Commodity product that we really were launching for this retail avenue with an ETF, with Claymore way back in the day. We still have that product out, our big partner on that as Direxion Investments out of Manhattan. The COM ETF, C-O-M on the NYCE is our product with Direxion. So it’s been around a long time. We also offer that as managed accounts to institutional investors. That was kind of the second thing.
Tim Pickering:
The third thing is another thing that we’ve carved out of Auspice Diversified, that melting pot, Auspice Short Term, where we’re taking advantage of non trend pivoting movements in trends when trend rolls over. How do we take advantage of that and sort of offset that negative effect in trend when you get something back at those inflection points? So we started offering that out separately. It’s also contained within Auspice Diversified.
Tim Pickering:
And then the fourth thing is our newest, and that is the Auspice One Fund, and that is taking a full compliment CTA exposure, taking the rest of that capital, given you have lots of cash as a CTA. We run a margin to equity that’s under 10. Take that rest of that cash and create a more traditional foundation portfolio; equity upside, fixed income, sort of a modified balanced portfolio if you will. But not just passive where we’re just long and hoping, but having an element of that long, flat exposure.
Tim Pickering:
If equities are going up, we obviously want to be long. If they’re in a protracted down move, we want to go to cash and protect that. But the key idea of the one fund is full compliment, CTA exposure, full compliment traditional equity and fixed income. We’re not stock pickers, that’s something we don’t do, but we asset allocate across a global fixed income and equity basket and put those things together. And it’s really how we run our money.
Tim Pickering:
Obviously, I’ve a lot of CTA exposure and again, I’m not a stock picker, so I want to take careful equity upside and my downside at these times, when it does scare you or correct, and who knows when that’s going to happen. So that’s really the approach.
Jason Buck:
There’s two things I want to go back and touch on, highlight or ask them further questions on.
Tim Pickering:
Sure.
Jason Buck:
One is I want to highlight your COM ETF, C-O-M ETF, because we had a lot of questions obviously about how could DIY investors implement a lot of diverse portfolio construction strategies within ETF universe that can afford separately managed accounts, et cetera? So one of our first recommendations is always COM. So my first question is, why don’t you really have any competitors in that?
Jason Buck:
And the second is maybe along the lines of this is, why do most act 40 trend-following commodity funds suck? Is it because you can only go a long flat? Why is that universe always not as good as like the full suite of products that people offer to SMAs?
Tim Pickering:
Wow, that’s a big set of questions. There are other products out there, we certainly didn’t invent the wheel. There’s products by Goldman and there’s product by Deutsche Bank and there’s definitely a big brand product out there and we compete against that. I think for us as a manager, being a boutique manager and even partnering with Direxion, they’re not the biggest of the ETF companies, they’re a great partner, but you’re competing against brand.
Tim Pickering:
And we really find this in our time in the ETF space since 2008, brand is a big thing in that space, it’s retail recognition of something. And it doesn’t necessarily mean it’s the best. The COM ETF is right now the only five-star Morningstar-rated commodity ETF in the category in the world. So we have extraordinarily good track record there despite being a very protracted, tough commodity period over the last long haul until very recently.
Tim Pickering:
But we’re competing on brand. That’s part of the reason from a business perspective that we choose in that space to partner as opposed to go it alone, put out Auspice ETFs, which we have done a bit of, but it’s very difficult.
Jason Buck:
Part of that difficulty, I wonder, what I was actually really hinting at, it’s like when people want exposure to the commodity space, like you said, there’s indices out there, but that’s buying hold indices. And as we both know that’s a terrible way to allocate to commodities. And so what I was really hinting at is like mutual funds have always popped up, but even those have restrictions and then ETF it’s like… What I’m saying is more from the regulatory perspective.
Jason Buck:
It’s like tying at least one or sometimes both your hands behind your back to give your best game to actually trade commodities. And maybe that’s why we don’t see a lot of trend-following commodity ETFs on the market.
Tim Pickering:
You touched on the regulatory side. It definitely not easy getting a lot of these products into retail hands through an ETF structure. An ETF structure is a brilliant structure, but there’s a lot of restrictions. Some of them in my opinion, and I would say this to any regulator is, are somewhat irrational like the way they look at risk, like dollar notional. Well, what does dollar notional tell you about the risk of my portfolio if I have a bunch of two years in there that have this big dollar notional? It doesn’t tell you much about risk.
Tim Pickering:
I think that’s the challenge is part of our quest, if I’d take that step back is, we wanted to figure out ways to put managed futures and commodity products into the hands of people that really need that diversifying exposure, and that is the retail investor in my opinion. The institutional investors have lots of choices and lots of delivery mechanisms to choose from, it’s the retail investor. But there again, we went at this fairly early, starting 2008 with the first ETF natural gas, 2010 with the Broad Commodity product.
Tim Pickering:
And then did some managed futures, sorry, ETFs and it just was the wrong time. I think we all understand, and we’ll probably get into this, about CTA managed futures is it is a lumpier return. It does come in in episodic periods. We all want smoother, and that’s the quest, but it can be a tough thing for institutional or retail investors to hold long term. When they look at their portfolio or their advisor looks at their portfolio and says, “Everything else is up in the portfolio, but this one’s down,” why should I hold that?
Tim Pickering:
So the timing of these things, the regulatory pressures, it definitely makes it extremely difficult. I think part of being CTA, almost look at it like my farming family background, it’s a perseverance in a way.
Jason Buck:
That’s how I was wanting to hint at because we get those questions all the time like why aren’t there ETFs? And I wanted to have you eliminate some of the brain damage that goes into, that’s why kudos and hats off to you guys for going through that to try to bring that ETF to market because it’s extremely difficult.
Tim Pickering:
Yeah, [inaudible 00:15:53].
Jason Buck:
Thinking about the one fund, I’m curious, combining trend-following CTA with equity and fixed income. Sometimes to have that uncorrelated or negatively correlated nature of CTA with equity and fixed income, a lot of times you want to pair it with buy and hold, but you chose to go long flat. And that may change the correlation structure a little bit. I’m curious how you thought about that.
Tim Pickering:
That’s a great question. Well, one, we thought a lot about how we invest. That would probably be the top thing, and then we looked at other product that was out there. And there was two things that grabbed us, we’re not the ones to invent the wheel here, but we looked at other product and we saw that buy and hold type strategy. And if we look at some of that product and how it did in Q1 of 2020, didn’t do very well. Obviously buying and holding was a scary thing to do in Q1.
Tim Pickering:
And then what that does is put an enormous amount of pressure on your CTA to perform. Now, we believe it depends on the makeup of your CTA and we’re a little bit different than a lot of the massive brand CTAs in that we have a big commodity tilt versus our peers in general. And if you are a financially tilted CTA, as many of the big brands are, Q1 2020 was a pretty tough road. And so if you don’t perform on that, you don’t perform because of you’re holding equity exposure, that makes for a period of time that is not pleasant for you as an investor or your investors.
Tim Pickering:
And we felt, we can do better. This was the whole idea of the Broad Commodity strategy that we did starting back in 2010 that we want commodity upside, but we want to control that downside. So why wouldn’t we take that same philosophy to what we want with equity exposure. And it really was as simple as that. I think that combined with our commodity tilt, we felt was a very good combination versus the way some others were doing it.
Tim Pickering:
We’ve also seen where on the equity side, juxtaposing the CTA in a portfolio like that, somebody picked like just S&P. I can’t get my head around that. I don’t just want S&P exposure, surely don’t want it passively. It can be great as we all know, but it could be horrific too, and I’m not willing to take that risk with my money and nor would I think an investor would want to. So we just thought we could do better.
Tim Pickering:
And it was taking the same methods that we’ve been using in these other products that you’ve asked about and applying them in a different way. And it really almost like taking what we do across these products and combining them differently, different weightings, but really we’re not doing anything different. We didn’t invent a new strategy, we didn’t combine it magically. We just put a combination together, we thought was simple, robust, that would have a lot of longevity and perseverance to it.
Jason Buck:
Great. And before we take a deep dive into the diversified strategy, I want to take a step back for a second. What did you study at university?
Tim Pickering:
I did an undergrad in finance at the University of Calgary here in Alberta, Canada. It’s where I went to high school as well as did my undergrad. I went into university pretty much knowing what I wanted to do for a living, I wanted to be a trader. I didn’t quite know how or how that was going to transpire. Probably like most young people with an intrigue about the markets, you start trading stocks because really futures were sort of this unobtainable thing or this obscurity.
Tim Pickering:
I thought about stocks definitely in university. I’ll back up one more step, and that is, I mentioned a farming family background. Probably one of the imprinting things of my life is my dad, again, from a farming family background, but he went on and got a physics degree. And he would take me down to the local broker in Saskatoon, Saskatchewan, Canada, middle of the heartland of Canada. And we go to the broker to watch rapeseed contracts, that was canola at the time.
Tim Pickering:
Obviously, important part of the farming family income stream, and so he was trading rapeseed futures and that obviously imprinted on me, but never thought about that for a long time. So I came out of university, I was offered a job at Toronto Dominion Bank, TD Bank, one of the big six conservative massive organizations. They had a trading development program. I got the job and it was a lot of exposure to typical bank treasury things, so the interest rate side of the curve, currencies, capital market derivatives.
Tim Pickering:
Everything except individual equities, that was a separate part of the business. So I had no exposure there. I came out of the program and I was offered a role in the shorter end of the interest rate curve, Bankers Acceptances, BAs. But that was great, come out of the program and you later have a job on a trading desk. What happened was a twist and that was, they lost their fairly experienced energy trader. And the energy trader was part of the prop trading team, the proprietary trading team that traded everything and they asked if I wanted the role.
Tim Pickering:
I was the kid from Calgary, wore cowboy boots on Friday and what did I know about energy? And I still remember my answer, “I know how to risk one to make three and I’ll do it again and do it again.” And they liked that, and that was a start of my career on the commodity side. I saw it as a wonderful opportunity to do something different than what was going on. And now I’ll give you the timeframe, how old I am. 1995, that’s when I started at TD on the program. It was the .com boom and here I was pointing myself at commodities and people thought I was throwing away my career.
Tim Pickering:
But I looked at it like, what an enormous opportunities? If you look back 30 years before that, commodities were the rage and they’re going to come back and I think this is going to all happen again. And of course, early 2000s, went again. That’s my background and how I got here.
Jason Buck:
And correct me if I’m wrong. Once you specialized in energies, you eventually ended up at Shell, correct? And that’s where you really made a name for yourself and developed the relationships that eventually led to Auspice?
Tim Pickering:
Yeah. The actual relationships when I was in Toronto at TD Bank have proved very valuable in my career. Toronto is Canada’s New York and financial center, so that definitely came out later in life. Shell was an opportunity to take the strategies that I had learned and developed at TD and trade them focused in the energy space in a very big way. And if you think of the timeframe, early 2000s, the merchant energy area was all the rage.
Tim Pickering:
So it was an exciting time to be a energy trader, if you will, but I thought going to Shell, I was going to learn a lot more about the fundamental side and really change and evolve from this rules-based quant trader. And what I realized was, at Shell was the opportunity was to continue to be a rules-based quant trader and approach those markets, same markets that my peers at Shell were trading, but do it in a very different way. If I could provide that non-correlated return to the portfolio of traders, that was going to be valuable to Shell.
Tim Pickering:
That’s a bet I made and a bet that paid off. I made money differently, I made money at different times, and I did provide that almost CTA log like non-correlation of which I wouldn’t have even had a clue what a CTA was really at the time. But that was the logical thing to do was take it to the next level, take this very conservatively structured background from a Canadian bank, go to Shell and take it up a big notch. And so I did that in Calgary first. Back in Calgary from Toronto, and then became VP of trading and moved to Houston and ran it over there.
Jason Buck:
Well, that’s quite, I guess not culturally different, but at least the way the weather is different between Calgary and Houston, right?
Tim Pickering:
You think it’s the energy business, so we’re the new center of Canada here in Calgary, so to speak and the heart of the energy and ranching business, very similar, so a lot of cultural similarities. The way you live and things people talk about. Business was done quite different, so that was probably the biggest adjustment. But great experience and again, through a very tumultuous time, through 9/11 and the merchant energy meltdown, the implosion of Enron and Dynegy and Mirant, and the list goes on and on, but business was forever changed.
Tim Pickering:
What came through that was a period of enormous volatility. And so, as you might imagine, that was very exciting, potential to be very profitable and just a great time to be involved.
Jason Buck:
And so why did you decide to leave Shell and start Auspice?
Tim Pickering:
I at some point decided that being a VP at a massive global energy company was going to be a very straddled long-term thing in terms of my career progression. I always had the dream to start my own shop and I thought, I went to business school, but could I really run a business? That really bothered me. I ran a business at TD and I ran a business at Shell, it’s not the same. Could you do it from licking the stamps, to hiring people, to figuring out payroll? Could you start at zero and start a business? That really bugged me that I wanted to do that.
Tim Pickering:
And so what happened is, on a trip back to Canada in the summer, we have a cottage in the Rockies and I have a neighbor there. And he said, “If you’re ever looking to leave Shell and start your own shop, I’d probably be your first investor.” He was a successful loyal man, and that just imprinted on me, so thought about it for a long time. And then finally with Shell moved home in 2004 and stayed another year, but it was really the setup year to figure out how to go off and do what I was doing there, but do it, now I could trade everything.
Tim Pickering:
Same approach, same strategies, but we’re going to trade everything from crude to cotton, to coffee, to canola. That was very exciting thing to me. I was very fortunate in that about a year after I left, my trading partner at Shell, Ken Corner joined me and that was bringing the team back together, and the rest is history.
Jason Buck:
Great. What’s always kind of bothered me about the CTA space is you can say, “Managed futures, CTA trend-following.” Those all seem to be synonymous, which means realize that they have a marketing problem. What’s your personal definition of CTA or trend-following? What does it mean to you? Let’s just start with basic definition, what is the CTA?
Tim Pickering:
Well, commodity trading advisor, this is a regulatory definition in my mind. I believe the NFA has put a name together to define traders that use futures contracts really. And it’s old school because CTA, commodity trading advisor, you don’t just trade commodities typically. And in fact, the whole CTA managed futures space tilted as I was saying very much financially. But if you go back to what it’s all about, that’s what I like to think about, what is it all about? Where did it come from?
Tim Pickering:
There’s lots of stories about the turtles and these types of things. And then there’s a whole London club and a sort of a more academic background. At the end of the day, it’s pretty simple, concept is, we’re looking to in general look for market movements that we can capture, that we can follow. And with this concept, at least for us agnostic in terms of direction and agnostic in terms of product. If it’s crude that wants to move up, I want to be long, if crude wants to go down, I want to be short.
Tim Pickering:
And I get asked all the time because of the energy background and where we have a fair bit of expertise is, people say, “Timmy, why Long Crude? Is it because of the storage report? Is it because of this, because of OPAC?” I say, “Those are all factors, but I’m Long Crude because it’s going up and I’ll be out of crude when I don’t think it’s going up.” And our strategies point to that risk reward has changed. And so, back to the CTA concept, if I want to cover a lot of ground and in doing that in a rules-based manner is an efficient way to do that.
Tim Pickering:
And so, when you look back at the CTA definition, it does have this commodity history. And for a long time, maybe this is where the managed futures name came from, CTA was just too obscure, being commodity tilted was actually almost shunned for sure and I think that that whole story is coming around. We’ve been a commodity tilted CTA for a long time and proud to say it. It’s obviously a very interesting area.
Tim Pickering:
And again, if we look back at that massive history with commodities versus equities, commodities up until 2010 versus equities performed exceptionally well in history. Lots of opportunities broadly across a very diverse sector. And I think people are now getting the notion that maybe that 10 year period that commodities perform poorly was the anomaly, not the other way around.
Tim Pickering:
And so, I think for CTAs, for managers that are rules-based agnostic, open to products, doesn’t matter if it’s equity or commodity or fixed income or whatever, it’s kind of the world is your oyster as it was many years ago if you’re adapted managing the volatility and yeah.
Jason Buck:
I actually also remember when they tried to change their names under hedge funds at one point, was the late ’90s, early 2000s. That was another crazy time. But thinking about, I was going to get in this later, but might as well get in this now. And one of the things we search for when we’re building an ensemble approach to CTAs is we’re looking for people that are trading more than 40% commodities. And you guys have a heavy commodity focused and what percentages.
Jason Buck:
But maybe we should talk about why we have to do that is because so many of these firms tried to be much more hedge fund like, they tried to raise large amounts of AUM. They tried to target their volatility lower and lower to make it more palatable, so they moved much more into financials, so you might not provide that diversification. So how much percentage you guys are holding in commodities and why do you operate that way?
Tim Pickering:
May 31st, our last monthly report, we were 80%. But we’re agile, it’ll move around. But the simple reason is that, I already said it, cotton is not like crude is not like coffee is not like canola. These are very unique opportunities. And if my role is to provide non-correlated returns to everything else, it could even be resource equity. But if my role is that, then we’re looking to have as much diversity as we can and that commodity sector cannot be ignored for that level of diversity.
Tim Pickering:
I understand why big brands and smaller brands tilted towards financials, especially from a trend perspective in that we’ve had a 10, 12-year equity rally up until the shock we had in Q1 of 2020. It was pretty easy trend in general, so I get it. But here’s the thing, it’s one of the first slides in our deck is the mathematic benefit to a portfolio of a negatively correlated return stream versus a positively correlated return stream. Say a plus 0.2 or plus 0.3, that’s a low positive.
Tim Pickering:
But if you flipped down to zero and then go slightly negative to a minus 0.2, that is a far more accretive return stream than the positive. And so that’s just portfolio one-on-one, that’s just science. And so we’ve stayed true to how do we provide that negatively correlated return stream. And if even, juxtapose say Auspice Diversified, which is that negatively correlated return stream, with the one fund, we’re going to be slightly positive because we’ve got that heavier weighting to equity upside.
Tim Pickering:
And so that’s just a reality and putting it together, but it’s not going to be a positive 0.8 to equity. It’s going to be a low negative or a low positive. And so we’ve stayed true to that concept, and I think we go through these time periods where everybody’s chasing equity returns, and I totally understand. So showing a positive correlation to equities was probably a great selling feature. I guess we can only tell you about our experience, and that is the clients that we have, which range from retail investors, right to Canadian teacher’s pension plans. That’s public, so there’s no hiding that.
Tim Pickering:
They are looking for CTAs provide crisis alpha, they’re looking for CTAs to provide, I think some commodity alpha that they don’t have. And if you can provide that in a negatively correlated way as opposed to a slightly positive, you’re going to be accretive to that portfolio. And so that’s our goal, that’s what we’ve stayed true to. The double-edged sword, the other side of that is that can be a tough road at times. When it’s a low vol, 2019, we are… Seats can be tough for CTAs, equity is going up low vol, everything’s low vol, commodities are moving.
Tim Pickering:
It’s going to be tough for CTAs in general, unless they’re completely financially tilted. And it’s probably going to be a little tougher on us because we are commodity tilted and arguably, we’re a little bit more agile than some that helps in the volatile times, but maybe chops you up a little bit. But here’s the point, is in a 2019, is the investor in need of… What are they in the need of? Does it matter that I’m a slight paper cut or a slight X basis point drag on the portfolio?
Tim Pickering:
It’s not hurting their portfolio, they’ve got that equity upside through not only the equity market, but through even most traditional alternatives, private equity, real estate infrastructure, the list goes on. But the question is, who shows up in Q1 of 2020? That’s the difference, and that’s our request. It always has been to provide that crisis alpha, do it exceptionally well and hopefully outperform at that time. And then maybe we flip around to a period where commodities are just a little more volatile, a little bit more movement that we can go to that next layer and that’s commodity alpha.
Tim Pickering:
And I think that’s always been our goal, we haven’t deviated in 15 years. And we’re really happy with the results and we think our investors are too.
Jason Buck:
Man, you did a great job of like segue and actually covering all the next topics I wanted to talk about and pointed out further the marketing problem. That was perfect. Part of the marketing problem with CTAs coming out in 2008 was this idea of crisis alpha. And then as soon as 2020 hit and they didn’t provide that crisis alpha, they backed away from that. But like you said, you guys provide a tremendous crisis alpha and negative correlation in Q1 of 2020. But it’s interesting how part of that was trend length and everything. 2008 was a nice long trends and most of them were able to capture it.
Tim Pickering:
Yes, yes.
Jason Buck:
And then, like you said, and then mostly moved to financials versus commodity, so there’s a lot of reasons why it’s no longer a crisis alpha. And you highlighted what we always like to highlight is the power of negative correlation. People like to think of as a drag, but actually rebalance it provides. It’s accretive to a portfolio, especially-
Tim Pickering:
100%.
Jason Buck:
… if you’re compounding over time that obviously we’re in violent agreement about. But part of that too is, when I think about the the Diversified program is it’s primarily trend-following, but that’s not the only strategy you have in there. Maybe talk to me, like you said, it’s majority commodities, it’s majority trend-following, but maybe talk about the structure that you create within the ADP program.
Tim Pickering:
Yeah. Within ADP really four things come out and three are heavily dominated and one’s trend and we’re trying to capture trends, so we’re trend-following. We’ve got a core strategy that is extremely agile, we call it an adaptive approach. It adapts to the volatility of markets, so we don’t tune that strategy back-tested to fit currencies different than we do natural gas, even though they’re completely different animals. What the strategy does is it adapts to the volatility paradigm of that particular asset at that time.
Tim Pickering:
That’s our core strategy in Auspice [inaudible 00:38:34]. This is a strategy I developed at TD, continued to develop with Ken at Shell, and that core has been in place for the bulk of our careers, and It’s worth noting and here’s why. When I started trading trend at TD Bank, conservative Canadian bank, and again, natural gas being a Bitcoin at the time is one of the big focuses I had, how do you trend-follow this thing that’s completely erratic?
Tim Pickering:
Natural gas could be a 30 vol and you could blink and it would be at 130 vol. And then we go back and it would be these paradigm shifts. And so having a trend-following approach that’s been back-tested for the last five years became a really cumbersome way to do it, and a really ineffective way to do it. And so our overall approach was to have an approach that adapted, and not just the capital allocation and the risk management, those are obvious, but your definition of trend, how far you maybe looking back to confirm momentum in a direction that’s adapting to the volatility paradigm.
Tim Pickering:
But why I mention that is two things come out of that that we didn’t realize at the time. We built it for this erratic energy market, but the benefit was that adaptive approach brings in an element of robustness. We’re not tuning it to some number, because that’s what works. We’re saying, “Here’s the range of results. You’re going to float around in this area because we know this is effective.” And the way it’s going to find its way between these goalposts is basically due to volatility, so it’s adapting to the condition. So that’s one thing, and so this robustness.
Tim Pickering:
The second part is you can use it across all these different assets that are unique. So for us, it was this trying to get out of Shell to start Auspice because we were like, “Well, this is good. If we throw currencies added, if we throw this, it’s very effective as an approach.” And so, that core as been in place our whole existence. So that’s core. We do have multiple trend-following strategies in there, but really, that’s the core. So that’s the bulk, that’s two thirds, let’s call it the risk.
Tim Pickering:
A second strategy is called Auspice Short Term, and this is capturing those short-term movements when trend is flipping over. It’s been going up, it’s been going up. Now it’s kind of stalling out, it’s starting to go back the other way, get short and buy it back in. It’s akin to gamma scalping in an option book. And that adds an element of help. That’s the reason we included it. It’s not trend, we’re not talking short-term trend, we’re talking a very unique return driver that we had honed in our time at Shell, bringing it out in a different role here and as a truly just a diversifier to trend, that’s what it does. And so that’s 20 plus… Sorry
Jason Buck:
Let me ask two questions on that before. Sorry to interrupt you. Is that the two things I think about that is it speaks to your intellectual dexterity. Because what always bothered me about trend is when they get hurt is in a mean reversionary environment. So why wouldn’t you combine a little bit of that to smooth out your equity curve? And that’s what you’re saying, but also a lot of times trend-followers also trade every market the same, but it correct me if I’m wrong, the bulk of the short-term is in energies.
Jason Buck:
And that speaks to your experience in the energies market is there’s these different parameters with the energies that you’re finding different trading strategies seem to do well. So combining that with the bulk of the trend-following is very creative to the portfolio. Is that fair?
Tim Pickering:
That’s fair and like if you say, “Well, why the focus on energy?” But one, we have a ton of background in it, we have a ton of data in it right down to tick. And so we’re very comfortable with our research in that space. And let’s be honest, the energies in general operate at a higher volatility. And so there’s more chances for this sort of movement back and forth within a longer term trend or when trend rolls over that appears quite regularly in the energy space in general.
Tim Pickering:
So we looked at it as, here’s this great diversifier. It’s not the typical way to go about short term CTA, because it’s non trend. This is going to be highly accretive. And frankly, right now, I just had a conversation with somebody about it yesterday, how Short Term doing standalone versus Auspice Diversified and trend. Well, trend’s winning the day here in 2020… well, 2020 and 2021 and short terms a little bit negative on the year. And that makes sense because it doesn’t have as much opportunity when things are trending.
Tim Pickering:
If you just look at a chart, really energy’s trended, and then they consolidate a little bit in March. Gave an opportunity to make money on that other type of strategy, and then they’ve been on this low vol melt up rally since. And so those things are balancing each other out. And so that is a core part of it again. So what is it doing? It’s exploiting volatility using both mean reversion and short term momentum in this tactical, non trend-following strategy that is accretive to trend.
Tim Pickering:
And so we’ve had that in the portfolio, we offer that out as managed accounts as well. But that’s another key differentiator of what we’re doing. So there’s not only that commodity tilt, there’s not only this agile approach, there’s this short term overlay that we use that we can’t find anything literally on planet earth that it’s correlated to. So we know if it’s got a positive absolute return, it’s going to be highly accretive. So that’s the second thing.
Tim Pickering:
The third thing is term structure, and that doesn’t sound very exciting. But we did have the opportunity to learn a lot about term structure at Shell in our energy background given when we were managing the business there, focused mostly on the derivative side. We could see what the storage team was doing, storage for natural gas, the logistics around crude oil and pick another energy commodity. That’s a big deal from a physical perspective.
Tim Pickering:
Where do you want to be on the curve? How to optimize that term structure. And so we came up with rules-based ways to define how we want to be placed on the curve. Whether we’re doing it groundbreakingly or not, I don’t know. Other than we know as a standalone that this makes money. Do you want to be long in the front of natural gas when it’s highly contangoed and take that negative roll yield? Or do you want to push yourself further back? And there’s a statistical answer to that.
Tim Pickering:
By the same token, look where we are now, maybe not this five minutes, but where we have been, and that is commodities and backwardation and actually having a tailwind with trend, and that hasn’t happened in a while. So place yourself in the right part of the curve and take advantage of that. That’s a key part of what we do. Not a very [crosstalk 00:45:46]
Jason Buck:
Is it fair to call the terms of structure carry? Is it fair, you’re just capturing the carry of the term structure?
Tim Pickering:
Yeah.
Jason Buck:
And what’s interesting is, in generally managed futures, that’s part of the trade is a term structure, but when you parse that out, when you separate that out, it tends to be uncorrelated maybe do the other strategies, if you can select out term structure carry, is it?
Tim Pickering:
Yeah. We can actually split it out and at, do an attribution and say, “This makes money stand alone.” It’d be a very sophisticated thing, but for some group that’s looking for, again, a unique return driver, that’s a standalone thing. So those are the three core things. Mean reversion is something we mentioned in the return drivers of what we do, but it’s not something we target specifically. There’s elements of it in the short-term strategy, so we want to acknowledge that.
Tim Pickering:
We’re not big mean reversion traders. Right or wrong, it always felt like that’s like selling vol, selling optionality. When you come from a commodity energy background, selling optionality always ends in the same result that’s not good. You make money, you make money and then you disappear and I guess they moved to another shop. And so that’s not our background, it’s not something we’re super comfortable with. So it’s just not something we’ve focused on. Despite spending a lot of time researching the area, it’s just not something we focused on.
Jason Buck:
Well, it’s interesting. Actually, a counterintuitive thing about mean reversion that we found with some other managers is like in Q1 of 2020 when volatility really picks up, mean reversion can actually explode in value as the market’s whip sawing around. Is that what you found as well?
Tim Pickering:
Yeah, sure.
Jason Buck:
It’s like a volatility strategy at the same time, which is counterintuitive.
Tim Pickering:
It is counterintuitive. Again, I think if you’re a manager, the focuses in that space and that easier focus. Good on you. and I think you could have some very accretive returns, but again, for us, it’s just not the focus.
Jason Buck:
And then I was thinking about where you were talking about uncorrelated or specifically negatively correlated. I’m curious, if we take what everybody uses, a Pearson correlation, which is just a static picture of correlation. Correlations are really a free-floating thing and they change over time and maybe we. It’s harder for us to assess those, so that’s maybe the deep secret is nobody talks about is it’s hard to assess those over time. But what you can attribute them to is like, okay, over this bookended period of time, here’s my correlation.
Jason Buck:
But more importantly, and these windows of like this month when the S&P is down, my book is up and that negative… So you’re actually looking almost, you almost want to be like floating around uncorrelated and then go severely negatively correlated when the S&P goes up.
Tim Pickering:
100%, yeah. And I think that is the key and we do have a negative correlation, and it’s because at these times of need, we’ve provided a strong negative correlation, and that’s great. The other thing we haven’t talked about is a positive skew, but we talk a lot about our skew. Let’s think about that, think of the equity market, it’s a negatively skewed market, low volatility, lots of little gains, and all of a sudden it drops. And most markets, including most alternatives do that.
Tim Pickering:
looking for positive skewed, the paper cut, paper cut, paper cut, they’re all low vol downside and bigger upside. That’s rare. And CTA back to CTA, CTA is one of the dominant ways to get that, and some will argue that. Some will say, “Well, there’s macro as well.” The problem with macro is most macro is discretionary, fundamental, and it can be or it can get it really wrong. And this is where again, that systematic approach is part of what helps develop that positive skew.
Tim Pickering:
We believe we have a very positively skewed result and a long track record of doing that. And again, that is something that is highly accretive to, I don’t care if you’re an institution or a retail investor, you may need something in there or you should have something in there that provides that effect. And so the positive skew along with the negative correlation is really a key thing. for sure.
Jason Buck:
Obviously we’re extremely like-minded with what you’re doing at one fund, what we do at Cockroach is the idea of actually pairing convergent and divergent strategies ends up-
Tim Pickering:
Exactly.
Jason Buck:
… with a better portfolio, but-
Tim Pickering:
But just even those words, but that’s exactly what we talk about.
Jason Buck:
What’s always fascinated me is, we were talking about, it’s like the intellectual dexterity of it is like people even fall into one religious camp or another. They’re either in the convergent or the divergent camps. It’s like, “Guys, if you can buy in both of them, you’re going to be better off and you’re going to compound your wealth over the long term.”
Tim Pickering:
This is it, it’s just like we have a brochure for the one fund and the first paragraph I wrote was, “If you read one thing, read this.” And it’s about convergent, convergent. It is like, “You have this, I don’t care who you are, you don’t have this. You need this, pick the right horse. This is the magic of the one fund, this and this together.” And so there’s a bunch of ways of going about that, but to say, we believe wholeheartedly in it is a great understatement.
Jason Buck:
Let’s talk about maybe a little bit more, I guess, potentially controversial things. One is, talking about gold. Be like, “Gold.” Gold is like, everybody goes, “What should I do for inflation?” Everybody goes, “Gold.” That’s the first answer. But as we know, gold has a high beta, like 2X to 4X beta to inflation, but maybe the correlation is not as high as people expect. At the highest, it’s like a 0.6 correlation. So maybe gold over the long arc of history has purchased power parody that maybe it keeps up with.
Jason Buck:
But in the intervening quarter, months or years, it might not provide that balance to inflation you’re looking for, and you wrote a great blog post on gold. So I’ll let you go off about just holding gold to cover inflation.
Tim Pickering:
Gold, oh yeah. This is a good one. Look gold, the way we look at things is gold is a great diversifier. It’s a statistical diversifier, but it’s an unreliable inflation hedge. Now, it can be an inflation hedge, there is history of that, but it’s surely unreliable in that regard. Let’s just be practical, so we’re all just sitting around the table and we’re thinking, okay, we’re going to get inflationary. Where’s it going to come from? Is it lumber? Is it grains? Is it food prices? Is it your fuel bill? What is it?
Tim Pickering:
And the reality is none of us know. Surely none of us knew how things were going to unfold with COVID. If you would’ve told me that the price of RVs and boats was going to go through the roof, I wouldn’t have been able to compute that.
Tim Pickering:
But this is reality in housing and lumber and all these things. The reality is we think it’s a far better way to protect yourself from an inflationary perspective, having a broad commodity exposure. So this is right back to our commodity strategies, I don’t know which, and I don’t want to be long all because that might be a disaster, but I want to be long based on merit. I want to be long the things that are going up, it’s that simple quip.
Tim Pickering:
And so we think gold has a very valid place as a statistical diversifier in a portfolio, but we’re not going to hang our inflation hat on it. Gold is, and I’ve been saying this for years, I don’t even know what gold is anymore. Is it a precious metal? Is it a currency? Is it a store of value? Is it inflation as well? I guess it could be all of those things. And we’ve even wrote a little bit about like, well then, maybe it’s crypto. Maybe crypto is that inflation hedge.
Tim Pickering:
Well, last month in our blog posts, we talked about that. My colleague, Brennan Basnicki wrote about it and said… Well, I looked at it. First of all, we don’t have much data, so don’t hang your hat, but when we look at it, it doesn’t appear to have that effect. Some small periods of time, but maybe it’s actually even better in a deflationary time. Reality is there’s just not enough data.
Tim Pickering:
Back to goal, it’s like, look, we have it in the one fund as a static allocation, we think it makes sense. And the biggest thing from an inflation perspective is the exposure to things that are moving based on merit. When I think of commodities as a whole, what are those things like? Why commodities? It comes back to that, cotton’s not like crude is not like coffee. Now you’re getting into the inflation story.
Tim Pickering:
And anybody, and I saw something on CNBC about a month ago and I can’t remember the gentleman’s name, not to throw him under the bus, but fairly established market commentator, he’s been around, let’s say many generations. And he was doing this call on CNBC from his cabin in the woods, hiding out from COVID. And he was saying, “There’s no inflation, there’s no inflation. What are you talking about inflation?” I’m like, “Where has this guy been living?”
Tim Pickering:
The inflationary effect that we’ve experienced in the last year, I believe is incredible and I think we’re early innings. Now, I know this new word has been thrown about, transitory, this is a transitory inflation. I think all inflation is transitory. Here’s the question, does it last one year, two years, five years or 10 years? It’s still transitory, it’s not going to last forever, but how long does this last? Well we’re entering year two and to say, there’s no inflation is crazy.
Tim Pickering:
Back to commodities, we know it can provide inflation protection, but not all commodities, the ones that are actually inflationary, so by those ones. Portfolio diversification, we know that makes sense. We also know there’s the potential for alpha generation. Commodities are truly a unique area, you can’t be an expert in all of them. But the diversification, the ways to play it, so many factors, we believe it is one of the truly most valuable areas and really this is how we’ve tilted our careers.
Tim Pickering:
Then there’s this last element, let’s call it the green transition. And this is not to be political. I’m not an American and my daughter is an American. But if we’re going to build back better, the first word was build, and build happens with commodities. It doesn’t happen with ones and zeros only. So the reality is like the commodity side of it, the inflationary side of it can’t be ignored. And so commodities become this, like they have multiple beneficial roles in a portfolio.
Tim Pickering:
And here’s what I believe, I believe investors, retail to institutional in general had forgot about this area for a decade. And now they’re on their heels looking for ways to participate in a responsible manner.
Jason Buck:
And that’s what I was going to ask you and you segued perfectly, but thinking about the commodity supercycle that you talk about is like, regardless of inflation or deflationary facts, your thesis would be almost that counterintuitively the ESG movement actually leads to needing more in-ground commodities than people realize.
Tim Pickering:
100%
Jason Buck:
And so there could be a commodity supercycle even without inflation.
Tim Pickering:
There’s no doubt about it. Like if we look at the money going into build back… Okay, so pre COVID, COVID hasn’t happened. As we were coming out of 2019, commodities were some of the biggest calls on Wall Street. Goldman Sachs and the like for… So there was no COVID, there was no inflation. They didn’t have that worry. What they were saying is the world from an infrastructure perspective is behind, so we need to build. So that’s happening.
Tim Pickering:
Then we got this greening of the whole thing and this acceleration, and now you’re getting very, let’s call them traditional participants and consultants actually voicing their opinion, which is shocking with respect to commodities. But I’ll give you one mercer, probably one of the most conservative said, “Commodities are going to remain this essential part of the economy and investors should understand, there is no transition to a climate neutral world that does not involve commodities.”
Tim Pickering:
So the whole greening, the whole ESG, the whole climate neutral concept still involves commodities. We can go on and on about data points, but the reality is, I think this is… It’s like this collision of things. Now, supercycle, another word that gets talked about. We believe there’s two core elements to a supercycle; one, a prolonged extended period of under-investment in supply in commodities. And in general, we believe that has happened.
Tim Pickering:
Commodities have been thrown under the bus, ignored, this is old school. We’re going to focus on tech, great. But the reality is this area not only has been ignored from an investment perspective, but the investment of capital available to the commodity sector has been tough. Think you’re an energy company in Texas or in the oil sands of Canada. That’s pretty tough area from a capital perspective. That’ll come around. So extended period of underinvestment of supply, that’s element one.
Tim Pickering:
Then some sort of generational demand shock, something big. So what was that in the past? Well, that was China building their infrastructure in the early 2000s. Well, now we got COVID and all these implications and this money supply and the stimulus, and we got to catch up on infrastructure, that’s going to put people back to work. And we’re going to green at the same time, and you put all that together.
Tim Pickering:
We think this is the early innings of a commodity supercycle where inning one and of course, commodities corrected here in June to some degree. There was like, well, that’s over, commodities are over. And I think we’re just getting started.
Jason Buck:
And unfortunately I’d be remiss, I’m going to change topics, go back a little bit, but I want to talk about part of your trading parameter, sizing a trades position sizing, heuristics for monetization. There is a a niche argument within our space that probably nobody in the outside world cares about, but the idea of a volatility targeting. Everybody volatility targets to put on their position like most people are using the ATR to figure out position size.
Jason Buck:
While the trade is in trade, while you have the position on, as they like to argue all the time on Top Traders Unplugged is about, should you be volatility target that position? You said something very different that I believe it’s different and at least called the risk to exit. So tell me a little bit about what that means to you once you have a position on that risk to exit is? And how do you incrementally either monetize or rebalance to different sectors while the trade is ongoing?
Tim Pickering:
Risk to exit. What we’re really saying with the risk to exit concept is that, and this really is one of the bedrocks of our approach, and that is, from where you are mark-to-market. So you’ve got into this asset, like you said, you’ve got your one unit of capital at risk. You’ve normalized those risks across, these assets based on volatility. But then that market starts to get in motion, and you may have a trailing so you figure your stop loss becomes now a trailing profitable exit.
Tim Pickering:
But at some point maybe that that market, I’d pick on natural gas, takes off. And that point from where you are mark-to-market in that price to where you’re going to exit that P&L you have in that trade and that trailing stop. If everything in an instant just reverted and all of that disappeared, but you still get out profitably, but it all disappeared. That’s what your risk to exit is. We looked at that because it was a better way of understanding what we had at risk with something as violent as natural gas. And so we use that as an input.
Tim Pickering:
What’s really at risk? Well, it’s that maybe we’re going to get out profitably, but we could lose all of this. And if we lose all of this, this chunk, then that’s bad. There’s a couple of things; one, we give back a bunch of returns, but it introduces an extreme volatility to our returns. We had it here and then we’ve made 8% and we gave back six. What we’re up to, it’s like… Well, no, that kind of sucks because we’ve introduced more volatility to our returns too.
Tim Pickering:
And so we look at that at that risk of losing mark-to-market gains, not only on an individual market basis or a sector basis and make adjustments. Now, this truly does fly in the face of some of the traditional CTA approach, and I’ve argued with my friend, Jerry Parker publicly about this on other forums about, well, I think if anything you maybe want to add to that volatility. You surely don’t want to take any off. But our overall approach has been, we want to trend capture as opposed to trend-follow.
Tim Pickering:
This is the term that we’ve used for decades is, we’re trying to trend capture. We had to take that approach with the violence of natural gas, and we’ve taken that same philosophy on in that we’re just as concerned with losing mark-to-market gains as we are in losing one unit of risk capital. And so we will resize positions, we will resize sectors. And one of the most effective things we’ve had in doing this is, when volatility expands extraordinarily in some short period of time, it tells you to do something about that market you don’t understand.
Tim Pickering:
Maybe you’re way in the money, so do you stick with it? The example I actually like to use is it is not commodity-based. Years ago Swiss Franc was selling off and it was a long, long downturn and we were shocked like many others. And then their central bank made some decisions and the Swiss moved up like five, six big figures, and it happened really quickly. So did we give back all of our gains from the short side? The answer is no, because in those moments that it went from vibrating a little bit, little volatility as a low ball currency would be, to all of a sudden vibrating around very erratically.
Tim Pickering:
That told us that there’s something we don’t understand, take your risk off. It was a volatility exit. And that ends up being a very beneficial way we’ve found of capturing market gains when the risk reward changes. Now, is there the possibility of an opportunity to loss and it keeps going up even more because it got more volatile? You’re damn right. But we’re okay with that trade-Off and we may reenter, but we’re going to reenter smaller, but we’re going to capture that because there’s something we don’t understand.
Tim Pickering:
If the argument was that, “Well, by doing that, you’re going to cut off your big trends, Tim. That doesn’t work.” Well, I can prove to you it does because we hit some of the best results in 2008, in the volatility of 2008. We’ve had some of the best results in volatility periods like 2014 and again, in 2020. And so we believe that methodology works, trend capturing. It definitely flies in the face of traditional CTA.
Jason Buck:
And then in the last 12 to 18 months, you guys have done an amazing job. You have an exponential increase in your AUM, and that can also be a blessing and a curse. I’m curious how you think about that. When we’re in a semi capacity constraint, strategies or environments, how much do you worry about that?
Tim Pickering:
That’s a great point. What I would say is this, one of the benefits we have in our career going from the bank and then to Shell is we’ve traded very, very large portfolios in our career and we have a fairly good feel for the capacity of our strategies. And we know where we’re going to have capacity issues like in the short term strategy and where the capacity is greater like in the trend-following strategies, and each trend-following approach is different too. So we’ve got a fairly good feel for that.
Tim Pickering:
What I would say is we’re a long, long way from capacity in terms of what we do. So that’s a good problem to have. What was the first part of the question?
Jason Buck:
No, that was perfect. That was the answer, that was basically what we’re looking for. So if I get into my last question for you is, being a trader is extremely difficult. And then you alluded to earlier, you wanted to take on the challenge of being an entrepreneur and running the business side, which is extremely difficult as well. But now my question is, is it more difficult though to own a grain farm like you do now?
Tim Pickering:
One of my cousins is running our family farm that has been in existence since 1904. He’s doing a great job. I look at the sophistication of farmers like him now versus the way my uncles and grandparents ran things and it’s a world different. When you say, being a trader is very difficult and all those things, that is not the most part, I believe of my day. I just said this to someone the other day who knew nothing about the market, this is… To me being a trader and what we do for a living it’s pretty boring like we just lay bricks.
Tim Pickering:
It’s a process, you follow it. In 15 years of Auspice, there’s never been like, “Let’s deviate.” Always, “Let’s do better, let’s find better ways to capture gains and reduce volatility and all those things.” But the reality is, that’s not the hardest part of our day. The hardest part of a day is being an entrepreneur, surviving cycles, surviving fads, surviving people. People are tough.
Tim Pickering:
Human resource is a challenging area and that wasn’t my degree. And so those are the hard things, marketing yourself, being talked down to by some investors. All of these challenges and the reality is, you just have to look at it like I’m here for the long haul. I’m going to build a brand, I’m going to do my best and let the cookie crumble. But the hardest part is not the trading part, the hardest part is everything else. Now all of a sudden it’s been… I remember when we started, it’s 15 years later, we’re now a veteran.
Tim Pickering:
We’re still an emerging manager, but you’re right, our assets have almost tripled in the last year. That’s very exciting. We’ve got a great private equity partner, gives us all the leeway in the world. And it’s an exciting time to be a CTA, it’s exciting time to be a quantitative trader. And I think, again, in my career, I’m as excited as I was back in the mid ’90s, when there was such an opportunity coming about. I was too naive to really understand it, but now I can see it very clearly and I’ve never been this excited in my career.
Jason Buck:
That’s a perfect place to leave it. I want to thank you for a fascinating conversation and coming on our podcast. And if people-
Tim Pickering:
Honored.
Jason Buck:
… want to find you, the best place to send them to auspicecapital.com?
Tim Pickering:
Indeed, yeah.
Jason Buck:
All right. Thanks, Tim. I appreciate it.
Tim Pickering:
Thanks. Honored. Thanks for the time.
Taylor Pearson:
Thanks for listening. If you enjoyed today’s show, we’d appreciate if you would share this show with friends and leave us a review on iTunes as it helps more listeners find the show and join our amazing community. To those of you who already shared or left a review, thank you very sincerely. It does mean a lot to us.
Taylor Pearson:
If you’d like more information about Mutiny Fund, you can go to mutinyfund.com. For any thoughts on how we can improve the show or questions about anything we’ve talked about here on the podcast today, drop us a message via email. I’m taylor@mutinyfund.com. And Jason is jason@mutinyfund.com or you can reach us on Twitter. I’m @TaylorPearsonMe and Jason is @JasonMutiny.
Taylor Pearson:
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