TOMORR OW’ S TITANS 2023


Chief Investment Offi cer Bowmoor Capital London


Global Alpha strategy has been recognized by The Hedge Fund Journal’s CTA and Discretionary Trader Awards 2023, receiving the award for the Best Performing Fund over 3, 4 and 5 years in the Trend Following (AUM < $50 million) category. It has annualized at 26.84% (gross) over the past 10 years.


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Abbot, a mathematician and Fellow of The Institute of Mathematics and its Applications (FIMA), was fascinated by maths from an early age, and still agonises over the riddle of the odd perfect number, and views, “Beating the market with a system entirely based on mathematics as one of the greatest challenges for mathematics”.


Abbot has worked in the markets for more than 20 years, helping Duncan Duckett set up a derivatives desk in 2000, and was at Harmonic Capital Partners during its early years of growth.


Bowmoor Capital is led by CEO, Richard Liddle, a former RAF pilot, who has served in Iraq, Libya, Syria and Afghanistan, and says, “I am bringing elements of military discipline and risk management to the business”. Liddle previously was part of a team who raised over $500 million for a real estate fund.


COO Brendan Mulvany, whose home near Bowmoor Lake in the Cotswolds provided the inspiration for the fi rm’s name, brings trading savvy and much more to the table. He has spent all of his career trading derivatives, futures and options, including at Dresdner Bank and Bank of America. He traded as a “local” in the German Bund pit on the LIFFE exchange for 8 years. After that he setup and ran highly successful trading desks at Refco, Kyte Futures, GHF Futures and Marex. This also involved high frequency trading, with programmers in Singapore


Performance through cycles The performance objective is to double capital (gross of fees) every three to fi ve years, which implies annualized returns of between 14% and 23% (based on the rule of 70). Both the real money track record, and simulations reaching back to the 1970s and 1980s, show that this objective would have been achieved, on average. Profi ts frequently outweigh losses, thus performance has positive “mathematical expectancy”. Additionally, the Sharpe ratio has exceeded one and the Sortino ratio has been higher still at over 3, due to the


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owmoor Capital CIO, Gareth Abbot, has developed a distinguished trend following CTA strategy that has been managed since 2013 (and an earlier version of it dates back to 2006). The


Gareth Abbot


Bowmoor Capital’s distinctive Global Alpha strategy


downside volatility being dwarfed by the upside volatility.


The return objective was also met during the QE era of central bank market manipulation that wrong-footed many trend followers. Though the fund was down 6.71% in 2018, a year bereft of trends, it had several other very strong years. “We did have some short-term underperformance over 1-3 year periods, but overall, we recovered, and had some spectacular years. The best was up 72% in 2014, and up 49% in 2017,” says Abbot, who judges that, “The post GFC market climate did diminish opportunities, but now we are back to more normal markets, which mean non-normal fat tail price distribution in statistical terms”.


Bowmoor pays more attention to maximum drawdowns than Value at Risk (VaR), though VaR is published in its reporting. Abbot fully expects one drawdown around 20% in every 3-to-5-year macro cycle as part of the strategy.


In the CTA world, Abbot admires Dunn for their consistent commitment to trend following over 50 years, and has also drawn inspiration from others such as Ed Seykota, Jerry Parker, Michael Covel, Perry Kaufman and Richard Dennis but also reaches back further for deeper academic foundations to the likes of David Ricardo and Charles Dow.


Dow theory The performance cycle aligns with the over 100-year-old Dow theory, which identifi es bigger picture macroeconomic trends in economies, macro and government policy of 3-5 years as being key drivers of markets. “There are always fundamental forces, behavioural biases, human nature and government policy driving markets. Charles MacKay’s Madness of Crowds and Popular Delusions never ages,” says Abbot. Though Global Alpha does not use fundamental or economic data inputs, it can be seen as “systematic macro” to the extent that its models capture major economic trends.


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