![]() ![]() Their newer approach allows them to capture the meat of the trend while not giving back too much and taking profits when markets become overly exuberant.ĭG Partners developed a conceptual approach to trend following as an alternative to the classical trend-following strategy that they had been using. They identified weaknesses in classical trend following, such as data mining biases towards being long and being in all markets all the time, and developed a conceptual approach to trends that only sought to be in the meat of the trend, recognizing that they would miss out on the profits in the early stages. Gorton explained that they tried to look at alternative sources of alpha but ultimately decided to abandon them and pursue a purely systematic, purely trend-following strategy to try and be a better trend follower. ![]() However, trend following doesn't always work, as markets go from one unstable equilibria to another, and there are prolonged periods where trend following isn't as effective, such as during the “dead decade” of financial repression.ĭavid Gorton discussed his focus on pure trend and how his firm adjusted their models to account for the prolonged period of financial repression and low volatility in markets. He believes that trend following is useful in a variety of portfolios because the returns are robust over long periods of time due to the persistent inertia in markets. Gorton talked about his background in prop trading and how he developed a core trend or classical approach to trend following, which is very much moving average and oscillator-based. The company manages around $3 billion, with most of it in trend following. Morgan, where Gorton ran one of the prop divisions in Europe. About DG PartnersĭG Partners was founded in 2002 and spun out of J.P. This summary is written by Rich based on a conversation in our CTA series between David Gorton, the founder and CIO of DG Partners, and the podcast hosts, Niels and Alan. ![]()
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