In a recent episode of "Behind the Ticker," Jerry Parker, founder of Chesapeake Capital an industry veteran in trend following and systematic trading, shares his professional journey and insights into the systematic investing approach that defines Chesapeake. Parker's career transition from accounting to trading was catalyzed by his training under Richard Dennis in the famous "turtle trading" program, which profoundly shaped his investment philosophy. His foundational experience at Dennis's training program led him to establish Chesapeake Capital, where he has dedicated his career to refining and applying systematic trend-following strategies.Parker elaborates on the philosophy of trend-following, emphasizing its reliance on strict system rules and objective price data to drive trading decisions. This method contrasts sharply with more subjective or discretionary trading approaches, relying on historical price actions to guide future trading decisions, aiming to capitalize on market trends irrespective of market conditions. This disciplined adherence to system rules, according to Parker, allows traders to manage risk effectively and achieve consistent performance over time.In discussing Chesapeake's operations, Parker highlights the firm's evolution towards offering ETFs and mutual funds that democratize access to trend-following strategies, previously the preserve of institutional investors. The ETF, symbolized as TFPN, encapsulates Chesapeake's commitment to pure trend-following, applying this strategy across a broad array of markets including commodities, currencies, and equities both domestically and internationally. Parker's passion for trend-following is evident as he advocates for its effectiveness in managing portfolio risks and capturing market trends.Parker concludes by reflecting on the broader implications of systematic trend-following for portfolio management. He suggests that while Chesapeake's strategies can serve as core portfolio components due to their comprehensive market coverage and disciplined risk management, investors often incorporate them as supplementary allocations to diversify and stabilize existing portfolios. His insights underscore the adaptability and enduring relevance of trend-following in the dynamic world of investment management.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Jerry Parker covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
So since our goal and our whole reason for existing is to cut down these outlier trades and capture these things and allow a small percentage of the overall trades to make all the money and pay for all the small losing trades, we really don't want to take correlation too seriously because as we've seen historically the markets are individual and they can do their own thing and have these videos and credit moves. So the ETF and the portfolio does a fantastic job of drawdown mitigation.
So we have all this diversification and all these different kind of stocks, long and short, half the portfolio. The other half the portfolio is made up of the currencies, the commodities and the bond futures. And we have some bond ETFs, some of the exposure to the bond markets that you don't get in futures, we pick those up in ETFs, like job bonds, mortgage backs, tips, corporate, duties, things like that. So we're just searching the world over for securities, for futures and trying to create this amazingly diverse portfolio.
Market Context and Positioning
And so we're some sort of the managed futures marketing is usually something like, please add us to your portfolio, a 5% or 10% allocation to your stock and bond portfolio, to for crisis alpha, to mitigate the times where stocks are really bad and have a big sell-off. We're like, hey, there's a more direct approach. Let's trend follow the actual stocks and not rely upon the small allocation. I mean, our allocation will probably small anyways. But we sort of say, let's get at this as quickly as possible and wrap around equities themselves, stop losses, trading stops, small losses, all the benefits and the risk management trend following has and pick up all this extra diversification that single stocks can give you that you don't get from indices, like right now every index, every stock index future is long and all around the world.
I'm Brad Roth, Chief Investment Officer of Thor Financial Technologies, and portfolio manager of THLV, the Thor Low Volatility ETF. Behind the Ticker, uncovers the inner workings of the ETF industry. We will interview portfolio managers and ETF service providers to dive deep into their work lives and their businesses. We will learn the inner workings of their strategies and what drives them as they continue to grow their company. Many of these individuals are entrepreneurs, and will have unique and compelling insights to share as much goes on behind the Ticker.
Key Takeaways
- The conversation explores important themes in crypto & digital assets relevant to today's advisor landscape.
- The conversation explores important themes in risk management relevant to today's advisor landscape.
- The conversation explores important themes in portfolio construction relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Jerry Parker highlights important considerations around crypto & digital assets. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of crypto & digital assets and risk management discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Jerry Parker, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.