TRENDSTAT CAPITAL MANAGEMENT, INC.
Peter B. Mauthe
World Currency Program
Total Assets Under Management:
$65.8m Notional Assets Traded
Firm Inception Date:
Number of Employees:
1991 from 4/91 to 12/91 / 2001 through February only
Annualised Standard Deviation:
Parker FX Index Rank as of March 2001:
10 out of 43
1. How and when did your firm begin?
Trendstat started in 1984 as a stock portfolio manager and quickly evolved into trading other products such as mutual funds, commodities and currencies. Today Trendstat no longer trades individual stocks and has evolved to trading about 100 markets worldwide, across six different strategies.
2. Who are the principals of your firm? Please provide a brief background on each.
Thomas Basso, CEO –
One of the founders of the firm. A chemical engineer by background, Basso has created most of the models in use today at Trendstat. He currently handles strategic planning, research and public relations duties for the firm.
Peter Mauthe, President –
Responsible for running the firm’s day-to-day operations, managing the firm’s staff and serves on the investment committee to help design new and improved ways to trade the markets. Mauthe has experience in asset allocation, registered investment advisory business management and floor trading.
Susan Basso, Treasurer –
One of the firm’s founders. She handles all the cash flow in and out of the company, as well as various special projects for the firm.
3. Please describe your best trade ever and when it occurred.
This may sound philosophical, but we don’t even consider trades as best or worst. I view each trade as the next sample in the next 1,000 trades that I will make. We have a very systematic way of viewing the market’s direction, risk, volatility and margin. If we execute both sides of the trade flawlessly, as our plan would dictate, we view that as a good trade, regardless of whether or not it made a profit or a loss.
That being said, our most profitable trades occur when we are on the right side of a huge move in a market. A good example was the infamous British pound trade that made Soros famous. We were short as well, and profited from the collapse of the pound along with Soros. Another was the collapse of the US dollar several years ago against the Japanese yen, when it got to 80 against the dollar. We stayed in that trade for more than 11 months and profited a great deal from that one trade.
4. What was your most difficult period?
The most difficult period we’ve ever had was from the treaty introduction of the euro to the start of trading. For about a year and a half, markets were fairly listless as traders didn’t want to commit. Everyone was second-guessing whether or not the euro would happen and who would be involved. We had to make decisions on what to do with the portfolio selection without knowledge of exactly how the euro would evolve. With choppy trends, if there were any at all, we took many small losses. Adding those up, it creates portfolio losses over a significant period of time. Since inception, that has been our worst drawdown. Since the introduction of euro trading, the markets seemed to have returned to normal, giving us our best annual performance ever in 2000.
5. What is your outlook about the direction of the JPY, USD and Euro for the remainder of the year?
The US dollar has been quite strong against the euro and the Japanese yen. In terms of our trading, we make no predictions on future direction. Personally, I see the US stock market as the catalyst for change in other markets. If the stock market continues to be weak, then interest rates in the US will have to be lowered and that may make it rough for the dollar against both the euro and the yen. In terms of the euro against the yen, I like the euro better economically, but as a contrarian, the yen has been badly battered and deserves a bounce of some sort.
6. What is your view on emerging market currencies?
I see emerging market currencies as illiquid and requiring a lot of detail and attention in trading, so we stay away. Generally, these currencies have more violent, abrupt moves that can be very profitable, but can just as easily be severe blows to the portfolio that we would prefer to avoid.
7. What types of instruments do you trade?
We trade 30-day forwards in the various currency pairs, some involving the US dollar and many not involving the US dollar.
8. Is leverage used? If yes, maximum leverage amount? What is average leverage amount?
Leverage comes from the instruments traded, not from any loans from our prime brokers. We manage some retirement funds, so we stay away from margin interest, which is not allowed in these portfolios. We set our exposure to each market based on three factors: risk, volatility and margin. All of these factors are capped to a pre-set percent of the trading size of the account. Because we don’t specifically manage the leverage level, it floats with the conditions of the markets we trade. Historically we’ve seen it down in the 1.6 times and up as high as 5.0 times leverage. Typically, Trendstat will see higher leverage levels during quiet periods and less leverage as markets become volatile.
9. What is the average length of time positions are held?
We have so many strategies with different holding periods, it’s hard to generalise, but we average holding a position 3-6 weeks. Profitable positions will stick around longer, say 3-12 months. Losing positions many times won’t make it through the week.
10. Average number of positions during the month?
We trade in a portfolio of 14-16 currency pairs currently. With rare exception, we will have positions in all of the pairs, either long or short, at all times.