Founded in 1997, the Millburn Diversified Program (MDP) trades in over 100 futures and currency markets across the globe. Among other programs of Millburn Corporation, it has a relatively higher weighting system.
The firm uses a systematic approach with strategies that are both short and long term. It aims to locate opportunities in the market represented by rising and falling environments. It makes use of models that are trend following and non-trend following.
Aside from that, it also uses models for relative value, intraday, event, fundamental and pattern recognitions. The firm believes in continuous innovation through research. To determine sound decisions based risk and opportunity, a risk management system is used.
The firm continuously develops short and long term approaches that are systematic. It is one of the most experienced alternative investment managers in the industry. The firm’s approach uses a statistical framework that makes use of a variety of factors that attempts to identify, explain and predict the scale and direction of returns from the trade of instruments.
Goals in Investment
The goal of Millburn is to deliver returns that are adjusted to risk and to have tolerable drawdowns.
Futures and currencies are being traded.
The Millburn Corporation relies on three principles to guide its trades. These are measurements that are comprehensive, methods that are driven by process and diversification.
These principles are not only applied to trades done by the Millburn Corporation but also to the team structures developed by the firm. To achieve a broad outlook of the market, the firm believes in generating information from various sources and types and is studied in relation to one another.
The firm has team that has a wide range of expertise, where individuals are encouraged to collaborate in an ideal environment. The MDP uses a variety of factors to understand and forecast the direction and scale of the returns. With this information, the Millburn Corporation can manage the risk.
Much of the success of the MDP can be attributed to its process in research and development. It places value on the set of technology, team, infrastructure, operations and that are governed by compliance.
Each of these factors is different but is vital in the system and is continuously improved. The effectiveness of the MDP approach is proven by the amount of assets it has. By 2014, more than 25% of its assets are investments from the firm’s own employees, family and former principals.
The firm’s approach is scientific and quantitative. It makes use of the statistical research and study of cycles and stresses in the market and the experience of the firm. This approach is able to transform its ideas into concrete strategies in investment, composition of the portfolio and risk management.
The MDP relies on market evidence that is compiled through scientific and practical approaches. With this information, the firm’s team responsible for research and development is able to analyze the market and its combinations of factors such as price, derivatives and data that are non-price related.
With this approach, the firm is able to achieve information that can be used as an advantage over other evaluation methods. Thus, the firm can make more appropriate decisions on positions, size, and directions it will take. Additionally, it will allow the firm to implement trades that are better and geared towards profitability.
To match the market, the Millburn Diversified Program is continuously being reviewed and improved. With these refinements, the MDP, not a specific employee, becomes the repository of the firm’s long years of experience and development efforts. Millburn Diversified Program can be used far ahead into the future. With this element, the Millburn is able to assess, evaluate and measure the effectiveness of its refinements.
The entire Millburn with its research and investment decisions are heavily reliant on technology. Using sophisticated tools for data, networking, systems for trading and other requirements of the business are satisfied. This is why the firm invests on itself primarily in technology and personnel, such as researchers, to continuously improve the system. With technology, strategies are done efficiently and with conviction.
Risk management is present in the firm and the Millburn Diversified Program. Risk is managed across all programs to provide returns that are adjusted to risk and with drawdowns that are tolerable within different market scenarios and time frames. The firm emphasizes risk management to monitor its strategies for investment but does not forget its humble commitment to its clients and their assets.
The firms and its approaches have remained consistent through different environments of the market and maintain diversity in its portfolio. It has remained strong despite stresses in the market.
A set of systems composed of multiple models control each trade and its corresponding calculation of risk. The first step is the consideration of various models that have medium and long term and directional approaches. These will locate trends and changes across different time horizons. Next past volatility overlay is considered. The size not the direction of the position is adjusted based on this overlay.
This consideration of overlay is made to maintain the risk on the entire portfolio and in each market within tolerable ranges. A signal is then produced to the instrument, whether to trade, in which scale and which timeframe. When the system makes this recommendation, portfolios are adjusted and created based on its past profitability ranges, liquidity and need for diversity or concentration. Parameters of risk are also considered every step of the way.
Management fee is 2%, performance fee is 20% and the minimum investment is $20 m.
2014 Millburn Performance Statistics
Annualized volatility is at 18.13%. Sharpe (RFR= 1%) is at 0.82. CAROR is at 15.22%. Assets are at $762 million. Worst DD to date is –25.65 and S&P Correlation is at -0.02.