31-year proof of concept history:
Discretionary Countertrend: Royston Investments 1987-2009
Systematic Countertrend: AHL 2009-10, Tudor 2011-16, 3SD 2017
Pure countertrend algorithms based solely on behavioral heuristics
Highest negative benchmark correlation
Non-replicable alpha evidenced by benchmark correlations:
SG CTA Trend Index -0.6 S&P -0.2
Biases of human nature are innate and 3SD’s system evolved empirically from divergent trading hypothesis of crowd behaviors
“Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance” Daniel Kahneman, 2002 Nobel Laureate in Economics
Slovik, Kahneman & Tersky’s pioneering work from 1982 on behavioral heuristics proves that human stupidity is predictable and the principles can be applied to behaviors of participants in markets of uncertainty. The 3SD system isolates examples to predict market turning points.
WHY 3SD COUNTERTREND?
Evidence shows that CTAs have become over-correlated as the industry has grown. The market inefficiencies, or edge, that they originally exploited are being competed away. Negatively correlated CTAs can have a strongly positive impact on a portfolio with CTA exposure.
Why is Manager A, with twice the return and almost double the Sharpe, NOT the best choice for a typical portfolio?
The profit potential from negative correlation CTAs has been underpriced by the industry, due to its rarity
“The true idea of alpha is returns that no one else can produce, that are unique to you. If you are doing something that is more known – arbitrage strategies, trend following strategies, carry strategies – that’s worth something, those are good strategies. But they are not the same as alpha that nobody else can produce.” Cliff Asness, AQR, May 2016
3SD Capital’s Countertrend system is available to qualified investors via segregated managed accounts (min. $5mill) or offshore Cayman fund (min. $2mill). Top-tier service providers for accounting, audit and compliance; average margin usage 3%. 3SD Capital’s principals are both ex-Tudor; for more information on the team and trading please contact:
3SD Capital LLC
Mt Kisco, New York
Pursuant to 4.7 exemption limiting participants to Qualified Eligible Participants (QEPs) as defined by the Commodity Futures Trading Commission, this document may not be construed as an offer to sell or purchase any security or futures product, nor as a solicitation for participation in any investment product managed by 3SD Capital. Such an offer may only be made to qualified investors via the appropriate Disclosure and Advisory Agreements.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS AND RISK OF LOSS CAN BE SUBSTANTIAL. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.