In this episode, Moritz Seibert speaks with Michael Neubauer and Joseph Waldstein from SMN Investment Services, a Vienna, Austria-based systematic trend following manager with a 28-year track record. Michael and Joseph explain how they initially got interested in trend following and how their systems have evolved over the years. Moreover, the discuss why trading many different markets – as many as possible – is important for their approach, and that the inclusion of synthetic markets such as spreads and baskets as well as less liquid exotic/alternative markets improves SMN’s risk-adjusted returns. Last but not least, Michael and Joseph explain why they trade VIX futures and why this is a market they trade with a different methodology given the mean-reversion pattern of variance, and how they are monitoring this market – and potentially exiting open positions - on an hourly basis.

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Episode TimeStamps:

02:18 - Introduction to Michael Neubauer and Joseph Waldstein

05:52 - How did they learn about trend following?

14:18 - The perfect match?

15:12 - What drove their decision to discretionary overlays?

16:52 - What is causing dispersion in the trend following space?

19:32 - The dangers of overoptimization

23:00 - What are their definition of risk?

27:20 - Are more markets better?

33:21 - Their research process

37:18 - What is their smallest and least liquid market they trade?

39:01 - How they use synthetic markets in their trading

41:20 - Their considerations about cash equities

43:30 - Why are they trading the VIX index?

46:36 - What is the outlook for trend following?

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