Jerry Parker Talks Trend Following, ETF with Blueprint & 60/40 Problem

November 2, 2023

Jerry Parker on the Excess Returns podcast

Jerry Parker, legendary Turtle Trader and Portfolio Manager of the Blueprint Chesapeake Multi-Asset Trend ETF (ticker: TFPN) appeared on Excess Returns podcast with Jack Forehand. The pair discussed the new TFPN ETF that is sub-advised by Jerry’s Chesapeake Capital Corporation and Blueprint Fund Management, as well as Jerry’s perspective on trend following as an investing philosophy, balancing risk and return, problems with the 60/40 portfolio, and other topics.

Below are some excerpts from the full interview.

The 60/40 Problem & the Potential for Better Risk-Adjusted Returns

skip to 13:55 in the audio below

Jack: “When you look at these strategies, they all seem to have better risk-adjusted return characteristics than any variation of a stock and bond portfolio. But yet, the vast majority of individual investors are running the stock and bond portfolios. Why do you think that is?”

Jerry: “They don’t know a lot about anything other than that. Long only: The media tells them it’s great and you’ve just got to hold onto it and buy the dips. And they’re in it with all of their friends as well. So if we all lose when stocks go down or bond goes down, we’re all losing, so I don’t really feel that bad.

An investment in a CTA or an alternative, you know, you could be out there on your own and underperforming and you’ll feel really bad about it. And so the obvious answer is, I think, it’s easy to do. It’s really difficult to lose a lot of money too in stocks and bonds historically, which I think branching out into other types of investments, people probably had some bad experiences with some bad alternatives.”

Jack: “What’s interesting, and we’ll talk about this a little later with your ETF, a lot of these unconventional-type strategies are now becoming accessible to your average investor. So you could argue, maybe part of the problem, probably not the majority of the problem, in the past was these types of strategies were hard to access. They were in hedge funds or they were in places where your average investor couldn’t get to them. But now we’re seeing so many ETFs come out that do run these types of more multi-asset strategies, so maybe that will help over time to get more people to think about these types of things.’

Uniqueness of Trend Following Individual Stocks

skip to 27:55 in the audio below

Jack: “You mentioned the individual stocks, and that’s something that makes you unique among trend followers. I don’t think a lot of trend followers do the individual stocks. A lot of them are doing indexes. What do you think are the big advantages – just you have more things to choose from when you’re looking for the trends you’re looking for?”

Jerry: “Right. I mean, by definition the index is an average, and it’s going to have a muted move. It’s not going to give you that outlier move that if you traded all 500 of those stocks, you know, you’d be long some of them, you’d be flat, you’d be short some of them because they all have their own trends. So, I think the legitimacy of overlaying a trend-following strategy on top of something like the S&P Index is a little shaky. It doesn’t make a lot of sense to me. You forego the diversification you could possibly get by trading them individually. You’re not going to get the outlier moves.”

Non-Diversification Risk: Because the fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a smaller number of issuers than if it was a diversified fund.

About Blueprint Fund Management

Blueprint Fund Management designs, distributes, and manages systematic, process-driven, and transparent investment strategies for financial advisors and institutions. The firm aims to make trend following strategies highly accessible to advisors by offering and sub-advising investing strategies that are available as a mutual fund or ETF. Across the product offering, the firm applies a rules-based approach to both asset class and time diversification, instilling discipline and removing human bias during emotionally charged market environments.

About Chesapeake Capital Corporation

Chesapeake Capital Corporation is an innovative provider of systematic alternative investment solutions, including a limited partnership, separately managed accounts, and mutual funds. The firm was founded in 1988 by legendary Turtle Trader Jerry Parker, who continues to serve as the Chairman and CEO. The firm’s consistent, single-minded approach to managing client capital is trend following, and its client base includes private and institutional investors worldwide.

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