Martin Fund Management:
Capturing outsized commodity moves Asymmetric risk/reward from option structures
By HAMLIN LOVELL FIRST PUBLISHED IN SEPTEMBER 2023
ver the course of more than 50 years of combined commodity trading experience, Martin Fund Management’s (MFM) CIO David Martin and Director of Business Development, Paul Wankmueller, have seen multiple cycles including
bull, bear and rangebound markets for individual markets and commodity super-cycle bull markets across the asset class. Their institutional long/short commodity trading strategy, launched in May 2020, has generated a Sharpe ratio above one and a Sortino ratio above two, annualized at around 30% net of fees to June 2023, and earned several performance awards. The directional strategy is substantially systematic, but is not correlated to trend following CTAs nor other systematic macro strategies.
Since setting up MFM to run third party capital in 2013, Martin has received overtures from the giant multi-strategy platforms, which would appreciate the diversification benefits of his strategy, but he prefers to remain independent. He spent two million dollars setting up the firm, which is CFTC and NFA registered. Current prime brokers are Goldman Sachs and Société Generale. SS&C Eze software is used for institutional quality
portfolio management, order management, execution etc. There are also multiple Bloomberg terminals.
Martin was previously a discretionary trader of directional and relative value strategies, using proprietary capital, at the New York Board of Trade and the New York Mercantile Exchange. Over the years his approach has evolved and adapted to the market, broker and venue environments. Higher exchange fees, regulatory fees and commissions have wiped out the profitability of scalping a few ticks, and raised the return hurdle for some relative value trades such as calendar spreads, which have also become more crowded. This has increased the incentives to try and capture larger directional moves, and carefully crafted option structures are well suited to making such wagers with limited risk. Martin has also determined that a rules-based approach is optimal, and systematized the insights from his discretionary trading into a framework and process that takes some emotion and discretion out of the strategy: “We have tight predetermined risk parameters, which systematize trade entry and exit. Trailing stops can also kick in,” says Martin. The process is primarily systematic, but can exercise discretion in areas such as reducing risk and sizing based on conviction.
Left: David Martin, CIO, Martin Fund Management 5 5
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72
