Well, I’m not sure that “blew up" is exactly
correct
5. Richard Dennis blew up two trading funds
Well, I’m not sure that “blew up’ is exactly
correct, but it is true that on two separate occasions, public
funds managed by Richard Dennis suffered large
losses and had to be closed down. As far as I know, one of these
cases was completely Dennis’ fault, and the other was
really nobody’s fault, but let’s look at each one
and put them in perspective.
In the first case, about 15 years ago, a public fund run by
Drexel Burnham
had to be shut down because the account lost 50% of its net
asset value and reached its legal termination point. I have
no idea how this fund, managed by Richard Dennis,
managed to lose all that money, because in that same year, both
the Turtle computer model as well as all the other Turtles
that were now working as CTA’s, had a large winning
year. Can somebody say “not following the rules”.
Dennis later admitted that he implemented various new and different
trading strategies, in part because he was
afraid that if he and all the other Turtles
kept chasing the same signals, the system would
not work any longer. Well, everyone, both human and computer
model, who stuck with the original program made money,
and Dennis, who did something ‘different’ lost money.
I guess if you have a proven system such as the Original
Turtle Trading System, and don’t follow your
own rules, even if you happen to be the inventor of the system,
you still do not get any special dispensation from the markets.
Now, as for the second instance which happened just a couple
of years ago, the markets had been going through a long and
extended choppy period, and all trend followers
were suffering.
Dennis wound up suffering close to a 40% drawdown during the
first nine months of 2001, and Kenmar Partners (the
Fund operators) said he had hit his liquidation point so they
shut it down. What people forget is that nobody makes money
all the time, and even good traders always give some back. In
the previous couple of years that Dennis had been trading the
Kenmar Fund, he had very impressive returns, such that all the
original investors in the fund still wound up with a profit,
even after the losses that were incurred. Imagine if you started
with 100, doubled it to 200, doubled it again to 400, then again
to 800, then took a 40% loss bringing you back down to ‘only’
500. You are still way, way ahead of the game, but everybody
just focuses on the (recent) losses.
