March Trader Profile: Angling for efficient returns

K.D. Angle was first exposed to the futures markets through his dad, who made a small fortune in the bull gold market of the late 1970s. “He was in the oil and gas business and the only thing I didn’t like about the oil and gas business is that oil and gas wells run out,” Angle says. “If I could figure out how to survive in an [open and liquid] market system I wouldn’t have that concern.” 

Angle would go on to work on a trading system and turn it into a successful newsletter business in the 1980s. “It got picked up by a ranking service [that] monitored my recommendations. The first year we did that we were #1 according to the [service], Angle says. “That report was picked up in an article in Forbes and we were mailing [the newsletter] into eight countries within the release of that article.”

While Angle’s trade recommendations remained strong, he had a hard time maintaining clients. “The problem with the newsletter business is that you can’t control the discipline of your clients,” he says. “I could not understand that even though our recommendations were doing very well, our renewal rate was not much more than 10% or 15%. It was because people don’t have the discipline to implement the strategy.”

When he recognized this, he redoubled his research efforts, got out of the newsletter business and concentrated on creating an asset manager that would eventually become Nevada based Angle Capital Management. 

“I got very serious about researching strategies. If we are going to be successful in this business we have to have unique ways of doing it. Unique performance can only come from unique methodology,” he says. 

Angle built a solid R&D structure. “We had to create our own computerized platforms, testing platforms; everything has to be created from scratch. The programming effort was extensive; all these things had to be generated, none of that was available back then.” 

While Angle has created several successful long-term trend- following strategies, it was not by design. Rather, it was where his underlying philosophy and research took him. 

“I like efficient trading strategies; meaning you get as much profitability out of acts you take. That generally means you have to lengthen the cycle of the strategy — more longer-term — and trade for the greater price movements,” Angle says, “I always have been longer-term in general, not just in trading but with business decisions. I am usually thinking three to five years out.” 

What his research indicated is that markets only trend about 12% of the time. “The rest of the time they are either going sideways or countertrend. The products that I developed are trying to participate in more of those days that are contributing to the longer term trend,” he says. 

His first program, Genesis, which launched in April of 2000, is only in the market about 50% of the time. In that time, Genesis has produced a compound annual return (CAR) of 15.49%. In 2014, it earned 38.10%. 

While raising capital in Switzerland, Angle met a principal of Dunn Capital Management and learned of its outreach to emerging managers. He would sign an agreement with Dunn that allowed him to utilize its strong research and analytics. While maintaining his independence, Angle says the relationship, which he maintains to this day, has been mutually beneficial. 

Four years later, Angle launched a second strategy, Keck, which trades the same time frame and markets (more than 60) but is more selective. Keck is only in the markets about 25% of the time and has earned a CAR of 17.44% since its December 2003 launch. Keck was up 26.23% in 2014. 

While on their face the strategies look very similar, Angle says they complement each other. “Where you get your non-correlation is through methodology and market exposure. The two products have traded 134 months and have both been down in the same month [only] 27% of the time; 73% of the time the products are either both up or one is up and one is down.” 

He has offered a combined product split evenly between the two programs since 2010, which has produced solid returns, CAR of 14.16%, over some difficult periods for trend-following. 

“We are 100% rules-based,” Angle says. “Not because we are too dumb not to know what to do, but because that is the only way you can thoroughly test a strategy. Once you employ 1% of discretion in the implementation of a strategy after you spent all this time researching it, you literally have thrown 100% of all the research effort out of the window.” 

He adds, “If 80% of the time the market is moving sideways or against you, [you need to] limit your exposure to that element of the market [so] you can improve your chance for better than average returns.”

Angle has been able to do that for many years. 

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board