How do LPs react when a manager changes direction?
Running a systematic futures fund, 4th year live track record.
Core thesis: tail risk mitigation, asymmetric convexity, negative equity and peer correlation - while still generating positive carry.
We sacrificed outperformance in bull years deliberately. That’s the product.
An allocator recently asked if we could lever up and chase higher absolute returns. We ran the simulation and changed the allocation to be more aggressive. Numbers are compelling. Still uncorrelated, still positive skew - but max drawdown triples and the Sharpe takes a hit.
The traction from a few existing investors watching the simulated version is real.
And that’s exactly what makes me uncomfortable.
I built this for allocators who don’t see it as opportunity cost. Who understand what they’re buying and why it belongs in a portfolio. The moment you start optimizing for “better bang for a buck” you’re catering to a different LP, one who will eventually compare you to something you were never meant to be.
Product will likely go into prod this summer backed by this FO.
On the other hand maybe I’m being naive. Markets have been relentlessly bullish. Crisis alpha is a hard sell when there’s no crisis.
So genuinely asking: have any of you navigated this? Stayed the course and found the right LPs eventually, or adapted the product and lived with the identity drift?
Any inputs? Any LPs?