PARTNER CONTENT
DUNN Capital Management, the winner of HedgeWeek Best CTA of 2023 award, and one of the oldest managed futures firms in the industry with a track record stretching back almost 50 years, offers fully systematic, quantitative, and statistical trading strategies. Jenny Kellams the firm’s Director for Investment Strategy discusses some of the current challenges and opportunities in the sector…
HW: How are current economic conditions affecting the hedge fund market?
JK: Investors are making a mistake if they SEE hedge funds as one market. The same can be said about mutual funds and ETFs. Hedge funds, mutual funds, and ETFs are not investment strategies, they are investment structures, or vehicles, to gain access to investment strategies. We are a systematic trend following CTA (Commodity Trading Advisor). So, just like in previous extended inflationary environments, DUNN and our fellow trend following peers are providing our investors a truly uncorrelated hedge to traditional investments.
HW: Which are the most significant challenges in the hedge fund industry right now and how can they be best mitigated?
JK: The two platforms that claim to be “democratising” alternative investments seem to be getting more traction in the retail space. While it is unclear how much “democratising” they have achieved, it is very clear that they have a growing influence on education about alternative investments. The education provided by these platforms focuses on what they provide access to, which is private equity, private credit, and private real estate. CTAs and other truly diversifying hedge fund strategies, that are liquid and marked-to-market every day, must persevere in educating retail investors, using real historical data to show how valuable they have been when investors needed them the most.
HW: Can you outline the most impactful drivers of client demand in the coming year?
JK: Typically, independent and contrarian thinkers tend to be most interested in learning about DUNN. This is no surprise given that we are, in almost every way, different from not only traditional asset managers, but also other hedge funds. This year we are hearing from investors who want our help due to the fear and uncertainty they are feeling from what is going on around the world. Most investors find comfort in learning that we are not going to attempt to predict the future, we are not going to distract them with fundamental information, and we are not going to be influenced by narratives in the news. What we are going to do is what has worked for the last 49 years, which is sticking to our system, managing risk, and following the data without emotion or cognitive bias.
HW: How do you see investor appetite for hedge funds shifting in the future?
JK: Historically, investor appetite has been driven by recent performance. If we remain in this extended inflationary environment or end up in a prolonged recession, trend following CTAs like us should see investor appetite continue to increase. These tend to be the environments that lead investors to firms like DUNN as we have a long track record of successfully navigating challenging conditions.
HW: What role can technology play in portfolio risk management?
JK: Technology has always played a major role in DUNN’s risk management. In the 1970’s we ran our system weekly on a mainframe using punch cards because that was what was available. As technology has advanced over the years, so have we. We now calibrate our exposure to a daily risk target that is geared to current market conditions. These advanced techniques, enabled by technology, allow us to implement a more robust process that performs in a wider range of market environments. Technology is only as good as the people that create and monitor it. We have always focused on finding the right people and trusting them to incorporate the right technology
Jenny Kellams, Director of Investment Strategy, DUNN Capital Management – Prior to joining DUNN, Jenny had a 12-year career in the securities industry as a financial advisor, owning her own investment management firm, JK Financial Group, from 2003 until she sold it in 2011.
