Turbo Charged Trend Following: Why Capturing the Market’s Biggest Trends Means Embracing High Volatility | Moritz Seibert & Moritz Heiden | Takahe Capital

**Moritz Seibert** (0:00)
Single market trend has a very good year, and that is right, because you've seen these major trends in like equities and gold, silver, and markets that we've mentioned. It deserves to be large. It deserves to be moving the needle. It deserves a larger footprint in our portfolio because that's the outlier trait that's working. And other traits that haven't, or other markets that aren't trending, that aren't doing well, that therefore as a result aren't as large in our portfolio, why should we increase them? It's kind of like adding to losers and taking away from winners, which is the exact opposite of a trend following strategies that is keeping losses small and letting winners run.

**Jack Farley** (0:38)
I am joined today by Moritz Heiden and Moritz Seibert of Takahe Capital. Moritz, thank you both for being here today.

**Moritz Seibert** (0:45)
Thank you for having us, Max.

**Moritz Heiden** (0:47)
Thanks, Max.

**Jack Farley** (0:48)
So we've been connected for a long time going back to the Real Vision days. I've gotten to follow along with Takahe and your growth. You guys have been relentless in trying to bring forth quantitative, diversifying strategies, really for absolute return purposes, mostly trend following. But I know that what you do is a little bit more than trend. We'll get into those nuances. But I want to start there.
Trend following has worked this year. It worked a lot better at the beginning of the year when gold was really trending. And it's one of the things that I have always found interesting is sometimes you get a trend that is so big and so strong in a large enough market, it can kind of propel the entire asset class forward. And it really felt like gold was doing that at the beginning of the year.
And so I'm interested in when trend following works. Is it that everything is trending or that you really only need one or two big trends in a year to make the strategy perform the way it's supposed to?

**Moritz Seibert** (1:53)
It's great when you have a lot of trends happening at the same time.
You know, if we can follow trends and capture trends in a diverse set of markets, and they all trend, then that's great. Then we're going to have a fantastic time with trend following strategies. But more often than not, what you see is that you have some markets trending, like a smallest subset of your portfolio, and many markets inside your portfolio not really trending. Most of the trades that we initiate actually become small losing trades, which means we probe the market for a position either long or short. It doesn't work. We take a small loss. It's appropriately sized and we move on. We don't cry about that. It's just the nature of our business. But a couple of these trades, they go on and go on and they become large and successful big trending trades. And these trades can become so large or so good in terms of profits that they will cover the losses of the many small losing trades that we had before and then make us some money on top of it. And you just never know which markets that's going to be. You know, earlier this year was big moves in gold and silver. Then with the onset of the Iran war, you had big moves in the petroleum markets. That's, you know, Brent and WTI and heating oil and gas oil.
You have trends in the ecocultural markets. You know, just ebbs and flows. You never know what it's going to be.

**Jack Farley** (3:21)
Well, the gold and silver trend feels like more of a classic building trend, where it's going for months and months and months. And not that petroleum hasn't trended, but it's definitely been rocky with a lot of job owning from the president. You're seeing a lot of gapping in the market, both up and down, whether there's events that are causing the market to gap up. And so I'm interested in how trend following strategies differ when you have sort of a smooth trend like gold. Not that we didn't have our gap days in gold and silver, but it just feels like oil has been much more volatile, at least commodities tied to oil. So I'm interested in how your models treat those two different types of trends.

**Moritz Seibert** (4:13)
So if you have a lot of volatility without direction, without the underlying trend being honored, then you have a big risk of being kicked out of your position. We call that a whipsaw, right? So you get into a trend, say you're buying oil, and then because of whatever announcement, it could be a, it's no longer a tweet, is it? It's a truth. How do you call it when there's something on truth, social? Maybe it's a truth, I don't know.