From the January 01, 2010 issue of Futures Magazine • Subscribe!

Wagoner: Success from the ground up

Jeanne Wagoner’s entry into the futures world was fortuitous if not altogether unique. A chance meeting with on old boyfriend led to a job as a runner back in 1981, and the rest as they say is history.

History that includes the creation of commodity trading advisor Hyde Park Associates, which has produced double- digit average returns with a low standard deviation since 2003 and a dedication to building innovative trading strategies.

Her friend was in a jam as he just lost one of his clerks and needed a replacement and Wagoner was in law school at the time but didn’t feel it suited her personality or skill set. “I clerked one summer and found that I hated sitting in a library with a bunch of books.”

She didn’t understand talk of traders, clerks and runners but was ready for something new. “He was speaking a different language but said just come down here at 7:30 on Monday morning and I did and just loved the trading floor,” Wagoner recalls.

“I was fortunate enough to take to it and liked it and kept on getting promoted through Geldermann,” she adds. Wagoner worked all the rungs on the ladder, picking up valuable knowledge, and then became floor manager for Harris Bank. From there she went to Rudolf Wolff as floor manager of their bond desk. That led to a job in software sales.

Wagoner was not just putting in her hours, but also taking technical trading classes and building knowledge that led to the software sales position and also to a move to New York.

In 1992, she moved back to Chicago and would work for Merrill Lynch and Prudential. After a brief stint in the equity world, Wagoner dedicated herself to developing a trading system based on her years of observing patterns in the market and her software and algorithm expertise.

“I came back to Chicago in 1992 and after a few years on the equity side, started thinking about those lines (we designed in the software) and I met a programmer and said here is my idea, here is the algorithm for these lines, let’s test this, and it all evolved ever since,” Wagoner says.

What evolved was the Hyde Park Composite program that launched in 2003. Wagoner’s initial medium-term countertrend system was utilized by an institutional trading desk of a bank from 2000 to 2003. In October 2003, Wagoner was able to raise seed capital and independent CTA Hyde Park was formed. She added a longer-term trending model to the countertrend system and they were off and running. In 2008, they added the Fast Trac program, which is offered independently and is part of the Composite. Fast Trac returned 23.73% in 2008 and is up 12.21% year to date in 2009. “We are always innovating,” Wagoner says. “We believe the more diversified systems that are being simultaneously employed, the higher the Sharpe ratio and the smoother the risk adjusted returns.”

Hyde Park COO Raj Sinha, who was instrumental in developing Fast Trac, says 2009 is a perfect example as the Fast Trac system offset losses in the Composite. All three programs trade a diversified group of markets that cover every sector at different speeds. Trades in the original medium-term countertrend system average 18 to 20 days. The trend following programs trades longer term and the Fast Trac is in and out in a few days and focuses on momentum, retracement and volatility trading.

While Wagoner is always innovating, she looks to develop robust strategies that apply across markets and sectors. “Many [CTAs] optimize systems to each market they trade, they will change the parameters for each market in the sector. Hyde Park does not do that. I view that as curve fitting,” Wagoner says. “What is preferable in Hyde Park’s development scheme is finding the smooth surface. One set of parameters works on the greatest number
of contracts.”

What Hype Park is looking for is getting in at a plateau as opposed to picking tops and bottoms. “This minimizes cliff risk,” Wagoner says. “We are looking for lower risk entry points. We try and [not have] different parameters even by sector. We want to be as close as we can to the center of a plateau. We don’t want to fall off the edge,” Wagoner adds.

This has produced a strong risk/return profile. The Composite program has a Sharpe ratio of 0.91 and Fast Trac’s Sharpe is 2.95. “I want a defendable trade, I don’t want to want to be buying a move that is already in progress. I am going to wait until it pulls back. I like to [get in at] a level where I have a defensible stop I can put in place. All of our models have an element of our entry points being defensible,” Wagoner says.

The result has been strong returns with a solid risk profile and growing interest. Hyde Park has $38.5 million under management and is the sole advisor to the Windjammer Fund. While the Composite program is down slightly in 2009, the Fast Trac program has minimized those losses and shows that Wagoner continues to learn and build on the expertise that all started due to a chance meeting.

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