Her background also gave her the perspective of different types of market participants. "Working at Enron, the P/L that was generated was tied to your book’s performance and that taught trade discipline, focus on fundamentals and the use of risk management. Inside of the corporate umbrella, all positions, whether opportunistic or tied to the business units or products, contributed to the overall margin capabilities of that business segment."
Now she only takes the trades with the best opportunities. "Like my work at Enron, you only had a position in the markets if you felt there was an opportunity to earn significant rewards relative to the risk, whereas in the trading and risk management function you always had a position just by being in that particular business, whether or not you chose to hedge that position."
Another unique element of Tlaloc is that Beach’s partner is her husband. "It gives me an opportunity to focus on the markets, the fundamentals, trading strategies [and] interacting with potential investors. A lot of the interactions from a compliance perspective — legal, IT, outsource consultants — he handles, so that takes a lot off of my plate."
Beach’s approach is dynamic and allows her to identify opportunities that a model could not. "There is a demand out there for discretionary fundamental traders because the majority of the space are algorithmic or systematic, and people are looking for some diversification. [My style] is very disciplined, short–term focused and a lot of times contrary to momentum- or technical-based strategies."
However, discretionary traders must focus more on risk management. "It is important as a discretionary trader to define your sandbox. I have done things that from a trade perspective I didn’t agree with but were prudent," Beach says.
For example, Beach correctly predicted the bearish USDA crop report in June but reduced a short position by half prior to the report because she knew it would create a volatile move. "When you are a discretionary trader, it is about building that confidence that you can generate returns and preserve capital."
While Beach acknowledges new fundamental factors and weighs them, she concentrates on basic supply and demand. "The perception is that the falling dollar is going to be beneficial for the commodities sector, but that is not always the case," she says. "You have to have the underlying supply/demand dynamic to support prices."
As for the name, Beach always has been interested in mythology and Tlaloc was an Aztec god of rain, fertility and water. While there are a lot of references in the trading world to Greek and Roman gods like Ceres, Tlaloc, like its founder, is unique.