William (Bill) Dunn launched his long-term trend-following commodity trading advisor (CTA) in 1974 after earning several degrees and embarking on an impressive research career. He came into trading from the academic world after earning a doctorate in theoretical physics from Northwestern University, and conducting operations research and systems analysis studies for various branches of the U.S. military. He has held fast to an aggressive approach to trading that has produced impressive and consistent returns, and he has helped launch and market numerous other managers. A $100,000 investment in 1984 in Dunn's WMA program (his longest running program) would be worth more than $4 million today.
After close to 40 years at the helm of the trading firm he founded, Dunn is making contingencies for the next 40 years. He has a succession plan in place. We spoke to him along with the firm's president and Dunn's successor, Marty Bergin, about the past, present and future of DUNN and managed futures.
Futures Magazine: Bill, you were one of the original trend following CTAs. Talk about how the industry has evolved since you started in 1974.
Bill Dunn: DUNN began in 1974 shortly before Congress established the CFTC and before the NFA was formed, so the regulatory oversight has increased. Industry assets have grown. The number of markets traded has expanded to include financial instruments, and in the beginning, we only traded on the U.S. exchanges. Now, we trade 24 hours a day on exchanges located around the world. Investors have more available information and choices. Technology also allows for much better risk management. I initially ran the WMA system using punch cards. Now, we are able to update the system daily and more closely monitor and control risk.
FM: Early on some traders designed retail managed futures products, you didn't. Explain why you took the direction you did?
BD: I am not only a trader, but also an investor, and I have always tried to manage the business from the investor's perspective. That is, I often ask "what would the investor want or expect?" And that's what I do. Early on, I was philosophically opposed to the retail structure, because I didn't think those products were investor favorable due to the fees and costs. I was also concerned that the retail investors would invest without understanding futures, and so they would pull out at the wrong time.