Moritz Heiden & Moritz Seibert – Trend-Following Spreads (S7E25)

Bullish:

• $ALTMARKETS - Smaller, obscure markets like California carbon emissions, oats, and sunflower seeds offer valuable diversification and trend opportunities that larger CTAs can't access due to capacity constraints.

  • “We believe that these markets are incredibly valuable inside a systematic trading portfolio. Think about California carbon emissions or oats or White Mason, South Africa, power, things like that.”

    Moritz·5:56

  • “All these markets can have different and independent trends at different points in time, and we can't forecast which one it's gonna be.”

    Moritz·15:11

  • “We wanna have access to all of these, and that's why we do it.”

    Moritz·15:37
• $SPREADS - Calendar and product spreads offer fundamentally different trend opportunities than outright futures, with independent trends at different points in time that add valuable diversification.

  • “These things are important because they have trends at different points in time relative to the outright contract.”

    Moritz·29:59

  • “A WTI spread position, be that a calendar spread or a crack spread, can have very, very different trends relative to, say, the front contract of that underlying market itself.”

    Moritz·30:08

  • “Capturing and participating in these trends is something that's very valuable to us.”

    Moritz·30:20
• $DIVERSIFICATION - Systematic diversification across many uncorrelated markets and spreads is essentially free alpha that improves risk-adjusted returns without additional computational cost.

  • “Diversification is really the thing that we're getting for free. I truly believe that.”

    Moritz·30:42

  • “The machine, our computers do not care whether they're calculating an additional spread or an outright market.”

    Moritz·30:47

  • “If we can get an ever so small diversification benefit for our portfolio, then I think we should at least aim to harvest that because in expectation, it will make our risk adjusted returns better.”

    Moritz·30:59

Bearish:

• $MGMTFEES - Management fees in hedge funds are fundamentally misaligned with investor interests and should be eliminated in favor of performance-only compensation.

  • “We've made the decision as a business to no longer charge any management fees. We think quite frankly all hedge funds should be doing that.”

    Moritz·6:41

  • “If you're holding yourselves out as a firm that's capable of producing alpha, which is a tough enough job to begin with, I think you should demand and be compensated with an incentive fee or a performance fee, and not with a management fee”

    Moritz·6:50

  • “It gets you all down the wrong trails, so we don't charge any management fees anymore.”

    Moritz·7:07
• $PREDMARKETS - Prediction markets have fundamental structural flaws including manipulation risk, murky resolution processes, and adverse risk profiles that make them unsuitable for systematic trading.

  • “The resolution of these bets, how an agreement is reached is sometimes a little bit murky.”

    Moritz·58:17

  • “These are sometimes big whales who have also in the past skewed the results towards their favor.”

    Moritz·59:19

  • “It's just about how easy is this market to be manipulated, who is the only token holder.”

    Moritz·59:55

  • “From the trend perspective, I think it's just too early and too ripe for manipulation to really include them.”

    Moritz·1:00:19