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So MINT was a pioneering systematic CTA in the early 1980s, and they did a 50/50 joint venture with the Man group. So through the course of the 1980s the MINT funds were marketed by Man in their global offices. So Man the commodity brokering firm had offices in Ulan Bator, outer Mongolia, and all of these places thanks to their two centuries-old commodities business, and they started distributing this managed futures fund to a broadly retail audience. They also embedded the MINT programme inside a guaranteed structure. You remember those with the zero-coupon bond and you use the remaining cash to fund margins on the trading account. That was just genius, absolute genius. So by the end of the 1980s I think that MINT was probably the first alternative investment shop to be managing more than a billion dollars.

NKL: Sure, I’m curious about something from that time and that is that we know that the Turtles were really taught break-out methodology, meaning you have a 20-day high or low, or 50-day high or low, and then you are on top of that, you add some exit rules and you add some risk management. All this taking place in the mid-1980s. I’m curious to know if you remember, I’m sure you do, but if you could share what did the initial AHL model look like? I’ve always, personally, been under the impression that it was based more on the moving average kind of methodology?

ML: The really early days, Niels, it was more of a break-out model. It was a break-out model, and it would scale into a position. So if you saw the repeat, it sort of patterned an end day high being supported multiple times. You would scale into a substantial position. Unwittingly, despite us all having scientific or physics backgrounds, this was uncharted territory, so all of the schoolboy errors that we all know and everyone that works for us has learned back in finance 101 – all those things about over-optimization and degrees of freedom – we did it all. We optimized the living daylights out of these models in their back history. Actually, by the happy accident of this scaling in feature of the models, that sort of disempowered our ability to over-optimize, so those were reasonably robust models. When we started dabbling in the moving average that you allude to, those are far more prone to over-optimization because if you do the schoolboy error of trying to optimize what would have worked in every single market over time, you come up with a fantastic simulation, but reality doesn’t turn out to be nearly so nice.

NKL: When was that, actually? Just before we go back to your story, when did you first move into the moving average type area?

ML: I wouldn’t say we moved into it. We explored it, and it became part of the programme, but not the whole programme. I’m not clear on the dates now,

but I’m going to say that that was probably in the late 1980s or early 1990s.

NKL: I interrupted your fantastic journey, so by all means go back and tell us what happened when you got involved with Man relatively early on.

ML: Yeah, I was going on to make a point because I was just drawing the contrast between the US managed futures industry, which, in my gross generalization or unfair generalization, was based on a set of traders’ rules, versus the AHL happy accident of some scientists who just began distilling and evolving and in the broad sweep of history, improving what we did, but it wasn’t always a linear improvement. What that turned into in the fullness of time was, I think, the difference between the approaches. People talk about the AHL DNA or diaspora, I won’t say dominating, but being a major feature of how the industry has evolved. I think that was the sort of introduction of the scientific method. Going back a little bit, I think that a couple of pieces of the story... as AHL still in... it was really a couple of years before we got very close to Man and before they took a stake in us. The three of us were over- enthusiastic and distractible kids. Through none of this story did we have the laser-like focus that we would all love to claim.

As I say, Michael was fascinated with the software language that he was developing and was making his best efforts to commercialize it and sell it. David was very driven by the asset management business, and he would be out on the road and spreading the good word about these programmes that we were running money in. I was somewhere between researching the programme and also doing consultancy, so we had a number of consulting clients that we would encode their trading businesses on our software and give them commercial advice. We did that for a Gilt market-making house in London. Then, interestingly, we did that for one of the commodity divisions at Man. They said, “We see a lot of this fund activity increasingly and wonder if you could model what the different funds are doing in these various commodity markets.” Of course! This turned out to be a useful intelligence for later on in our business when we started to be undermined by other market participants. So I think through that we got to know the Man folks, and in 1989, they took a stake in AHL. As I say, MINT had been gloriously successful and was probably over a billion dollars, and was essentially at capacity. So they had a very successful business. They really couldn’t trade any more. Their agents in Ulan Bator and far-off corners of the earth were just hungry for more of this terrific product. It sold like hot cakes, generated enormous fees (we can come back to that) and performed uniquely well. So Man took a stake in us, put suits on us, dressed us up, said no to the commercialization of the software, said no to

the consultancy business and we all buckled down and started working on further development of the AHL programme for the development of a number of different products.

NKL: How much assets did you have under management in 1989?

ML: I think when we first sold a stake to Man, it was a huge $30 million under management [he laughs]. Then, scrolling forward very quickly, in 1994, when they bought out the remaining minorities and IPOed the Man group, I think we were at the heady figure of $300 million... I think that’s right. That was an interesting journey in and of itself because what Man had was the MINT business, which was over a billion dollars; it was spilling off enormous revenues and I think that the business was so successful so early that at the time they were not committed to building a research effort, so from where we sat, or rather, from where the Man’s suits, as we called them, from where they sat, they had this billion-dollar business with 24 people, somewhere over in New Jersey, and these three kids and their $300 million of business, and we were over 70 people with a big trading team, with a big research team, with a big technology team and the Man guys said why do we need all of this stuff? Why do you need all of these researchers and technologists? We sort of looked at them incredulously and said, of course you do because its research; you have to keep improving it. That turned out to be the case. In the mid-1990s, I think some of the MINT funds struggled and AHL started to deliver on the research promise and, in a little bit, the rest is history.

That history was that at the end of 1994, once the IPO had happened, Michael, David, and I had pretty much gone our own ways. Michael left the firm and started a software venture capital firm and had a glorious set of products that they developed and sold on, and then rejoined me at Aspect later on. David had a separate research team within the Man group, Man Quantitative Research, and I held the baby of AHL through the course of 1995. It was a little bit of a depressing year, because on the back of 1994 was challenging performance for managed futures, and against this backdrop... so on the one hand they’ve got 24 folks spilling off money in the States and 70- plus folks in London – mouths to be fed, so I spent a lot of 1995 dismantling much of the research and technology team that we had built up over the years. At the end of that year I just said, I’m not going to do this. I left and took a year and a half out and then started Aspect with Anthony Todd, Eugene Lambert, both of whom had worked at AHL, and Anthony was also an Oxford friend of Michael and mine. We put in place the vision. Aspect’s vision was to take the managed futures business that AHL and Man had developed and bring it to an institutional audience.


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