What Makes Trend Following Work?
John W. Henry & Company has one of the longest continuous trading records among commodity trading advisors and hedge funds. That fact hardly needs to be mentioned, as the firm is also one of the best known CTAs. This is due in part to Mr. Henry’s interest in baseball and his sports celebrity status as the principal owner of the Boston Red Sox, but also to the firm’s almost 30 years of history. John W. Henry & Co. started to take clients in 1982. While the general strategy is systematic trend following, there are eight programs with distinct risk/return profiles. By the end of 2005, the firm managed several billion dollars. But the following years were difficult and some of the programs went through steep drawdowns. Current assets are less than $300 million. Despite the volatility that drove away clients, the overall performance of certain John W. Henry & Co. strategies is impressive. The longest running program, the Financial and Metals Portfolio, has an annualized return of over 21% s
