The Derivative - Building a Commodity Trader Multi-Strat with Tom Holliday of HIP investment

Episode Date: November 20, 2025

In this episode, Jeff Malec sits down with Tom Holliday, founder and CIO of HIP Investments, for an in-depth conversation on reimagining multi-strategy investing in the commodity space. Tom shares insights from his distinguished career, from his early days at Refco to working with George Soros and launching both Titan Advisors and Hip Investments. Together, they explore the evolution from traditional fund-of-funds to collaborative, actively managed multi-strat funds, highlighting the advantages of diversification, portfolio construction, and innovative incentive structures for specialist traders. The discussion covers risk management tactics, the unique challenges and opportunities of commodity markets, and why institutional investors may be under-allocated to this asset class. Whether you're an investment professional or passionate about alternative strategies, this episode offers valuable perspectives on building resilient, high-performing portfolios in today’s changing markets. SEND IT!Chapters:00:00-00:56= Intro00:57-12:56= Commodities Demand Attention: Navigating Trends, Valuation, and the Road Ahead12:57-28:27= Foundations of a Commodities Career: From Memphis Markets to Global Futures28:28-32:15= From Fund of Funds to Multi-Strat: Evolving Models in Investment Management32:16-44:37=Building HIP: Innovating Multi-Strat Strategies for Commodities44:38-59:27= Risk, Collaboration, and Incentives: Cultivating a Resilient Commodities Team59:28-01:13:19= Seizing Commodity Opportunities: Growth, Recruitment, and Market Evolution01:13:20-01:17:19= Commodities: The Case for Attention and AllocationDon't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and our host Jeff at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@AttainCap2⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, or⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ , and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠⁠⁠⁠

It's more of a qualitative thing, something that's more, you know, a model-driven strategy than a fundamental strategy. It's just trying to figure out, you know, it's just been in my career, the simpler the strategy, the simple of the model, typically the better. Welcome to the derivative by RCM alternatives. Send it. Hi, my name's Tom Holliday. founder and CIO of HIPP Investments. I'm here to talk about all things, commodities on the derivative. How are you, Tom?

Thanks for coming on. Thanks for having me. Great to be here. You look like you're in Tennessee or Illinois, usually we'd say Norway or Alaska, but the northern lights. somewhere right now. Right was that last week or two weeks ago, the northern lights stretched all the way down into the middle states there, which was exciting.

My daughter went out to Lake Michigan here and was sending all these pictures, and I was up in a building, and I'm like looking out, I'm like, I don't, what are you talking about? She's like, oh, it only works if you use this filter on your phone. and you can't actually see it with your eye. And I'm like, well, then did you actually see it? So we had this whole debate of like whether it actually happened. If a tree falls in the force and no one hears it, did it actually fall, right?

Exactly. So wanted to have you come on. We were chatting at a conference and share a lot of similar ideas on commodities and multistrats and all that good stuff. But let's start it out with a little background. And you know some of the old stalwarts in the commodity space as well. Yeah, I do. So I started my career in commodities in Tennessee and was at Refco. And Refco office in Memphis who was associated with Sparks Commodities with the famous and notable Willard Sparks,

who had a very story career in the commodity markets. did some really cool things with cook industries in Memphis before he started sparks companies and then became an order of refcoe willard sparks uh and what was he like i don't think i ever got the pleasure to meet him larger than life like i've known many people tell me about him but what give us the the background quick yeah i think he was he was larger in life but it was also genuine um you know he's in, you know, he's an Oklahoma cowboy that, uh, got his PhD in agriculture economics and did a big thing, which was the first grain sale to Russia in the early 70s. And, um, um, you know, was just, um, you know, really, really, really smart. Love, loved research. Love the ag markets.

And, um, like I said, you know, very approachable. Um, so it was, uh, it was a unique place to work. Yeah. And then Revco is another blast for the past. So Revco, were you out of there before MF Global took over and all that? Yeah. Yeah, I left in 96. But listen, Refco was an amazing place as well. It was a very entrepreneurial firm, allowed people to do some really creative things. They became the world's largest futures commission merchant. I guess there's nobody can actually claim that but it was they were the world's largest FCM and unfortunately like a lot

of firms got in a trouble in 0708 around reapoticating securities and some other things that unfortunately took them down but what a terrific firm what a cast of characters that came out of that place over the years that I still bump into a lot of them

today. It's kind of crazy. I think if you go on NFA, I think I was actually registered for like two months as a Revco broker before started my own firm, Attain. Do you know the secret handshake and everything? I don't. I don't know the secret handshake. And then tell it, so you grew up in Memphis?

I grew up in Memphis. And then got, so I don't think most people know, right? Like Memphis is a true commodity hub, mostly cotton, but like, tell us the commodity connection with Memphis. Well, yeah, I think it's, it's largely the Mississippi. Mississippi River in the cotton market, to really be the two. You know, Mississippi River being the main transportation system to take grains all the way down to the Gulf Coast for export. And then obviously the Cotton Exchange of Memphis, which was, you know, the world's largest cash cotton hub and all the characters that kind of came out of that with Dunavan Enterprises for years.

and now Joe Nicosia and what he's done for the cotton markets. It's Louis Dreyfus? Oh, yeah. And then all the other really colorful personalities in the cotton market that came through there. And then, you know, the famous one in the hedge fund side is Paul Jones, who's from Memphis, who started his career trade and Cotton, Billy Donovan, is his uncle. you know he you know him when you just call him paul jones right paul tudor jones ptj i call him tutor you know everybody else calls it paul i call him tutor i don't think anyone's called him just paul jones in 20 years but it's always to me right like new york had a cotton exchange

london had cotton right so it's like why did why did memphis become such a thing i guess just the river but to me it doesn't seem like it made sense to get all this cotton from right was it coming from the east going west to the river? No, so this is a cash cotton exchange where in New York was a futures market. So in, this is obviously the Mississippi Delta, which is where all a lot of the cotton was produced at the time, right, which was up and down the Mississippi River from Louisiana up to the Boothill of Arkansas, you know, both sides of Mississippi rivers where, you know, most of the cotton was was produced for years.

And then California began, you know, producing a ton of cotton. And then obviously, West Texas, where they just have, you know, just, you know, unlimited amounts of land that they can plant a bunch of scrubby cotton on. No water, but lot of late. No disrespect to the Texas cotton guys. But, no, but it's, you know, it can really make or break the crop just given if they get water, how much cotton they can make out in West Texas. But going back, you know, because all this cotton.

was was produced in the mississippi delta you know pre-civil war post kind of became the cash cotton hub of the world and did you know as like a kid like i'm going to get in the in the futures business in the commodity business had no earthly idea so um as a boy scout i remember going to the cotton exchange as a little kid and that's where they still wrote in chalk on the walls chalk walls the price of cotton in different contract months and it was right there on on in downtown memphis near the peabody hotel which is a very famous hotel but uh with the ducks the movie the firm they were went by the cotton exchange building you saw a big cotton bale kind of one of the windows i think he jumps out yeah into the car he jumps into a big bail of cotton so that was

the cotton exchange was still um kind of doing its thing back then but no i mean uh my dad was a doctor and I was thinking about becoming a doctor, and I'd heard about Dr. Sparks. Different kind of doctor. Yeah. Yeah, Ph.D. Dr. Sparks about, you know, from his reputation and some family friends that overlapped and some people I knew that worked at Rough Co. And when I decided I didn't want to do the medicine route, I was like, well, this looks

pretty interesting. So I started learn a little bit more and talking to some people and decided to make the jump. And what did what did that jump look like? So Revco and then how long before you ended up at the next spot, which was a pretty cool spot? Yeah. So, you know, Refco was for six years, you know, fascinating times. I think futures trading honestly is probably one of the best training grounds for markets. And why do I say that? I say that because, you know, futures, the contracts themselves have embedded leverage in them, and therefore, from a risk management standpoint, you know, you better have kind

of your, what's about you as you think about, you know, the notion of exposures you have, how you're trying to position a portfolio relative to a view, whether it's directional, whether through spreads, with relative value. you know futures trading has a strong fundamental component to it supply demand so the land really drives everything and understanding you know how supply demand affects prices things and then substitution that comes along the way by you know this one's too expensive like substitutes for this or regional and geographic arbitrages that happen because of that and then tough to substitute cotton polyester

yeah there you go uh so then um so then you know and then as you continue to think about commodities you you have this this this technical component too which is you know they're traded a lot by cta's you have positioning and you have flows and you have all these other things so fundamentals are good you from a to b over over the time frame but the path can be really really bumpy uh which technicals and positioning and flow can kind of help you with and as you know with futures trading unlike stocks, stocks you just buy and hold it forever because there's no, there's no expiration of a contract. In future trading, you have a calendar strip where you have expiration of a contract.

You have backwardation and contango, which goes into a roll yield or not. And little nuances like this, which make it fascinating from a market's perspective and a great training ground just in terms of risk and fundamentals and positioning, which I think lead then to every other kind of market that's out there and understanding those. principles and how they apply to really a lot of different markets. So I thought it was a great ground for that. If you can trade natural gas futures without getting run over, taking out on a stretcher, you're good.

You've learned risk, you've learned markets. If you understand the widowmaker, which is March April, you've kind of got everything else under control. But yeah, it's, but you know, all these markets have different nuances in terms of what are their drivers, you know, in natural gas, it's the injection of withdrawal season and weather. You know, how much is it impact, impact balances along the way? And it can be very acute and very short periods of time. And therefore, you've got to really be aware of how it moves those things. You know, in the grain markets, it's really a lot by the planting season and

growing season and what happens to, you know, those commodities during the key pollination periods depending on whatever crop it is. And then the now with Brazil coming on strong and planting everything, it seems like these days in the same crop year, then you've got to kind of figure out how balances are affected by those. If you go to something like power and electricity, you know, it's a whole different animal in terms of, you know, you really can't store.

You can't store electricity. So you use it or lose it. Not yet. of that as well relative to these other commodities so it's fascinating about all these they have different return drivers they have different things that affect them which make them very non-correlated which is which is pretty interesting um and then were you did you trade yourself ever were you ever trade in your own p and l well everybody does a little bit yeah a little bit but like i didn't trade for anybody else no it was just myself

Tell us about Titan. Yeah, so I left, so I actually got an opportunity to go to work for George Soros Fund Management in April of 2000. So this was right after the tech wreck, which happened in March of 2000. Soros was a little bit, I wouldn't say disarray. Stan had decided he wants to leave the firm. and he was the one running the portfolio. There were a lot of traders inside the firm at that time that actually left as well. So we had four internal traders at Soros at that time.

We had a lot of excess capital because all these other traders left. What years is this? This is 2000. 2000. So then we had to. So post the Bank of England? Yeah. Bank of England was the early 90s.

Yeah, so that was ancient history. But it was, it was, it was really fascinating. I got very, very fortunate where I got to work with George Rose and an investment committee to help allocate some out, allocate capital to some external funds. Let me interrupt you for a second. How does that work? How did you just, did you, was that luck that you just happened to be in the right place at the right time? Was he actively searching someone with the,

skills you had or right for people listening like how can i get such a job somewhere i wish i could say was no it's all because of me yeah it was all my zoom back in it's as you know there's there's there's a lot of good fortune and a lot of things we do in life and i'm a big believer in the harder you work the lucky you get you put yourself a position hopefully to kind of get noticed and there was actually a project uh i did with this this other woman i was working with the time where they were looking at potentially hiring someone to bring Internal that was based in San Francisco

and we did a project forum and off the back of that project I was offered a position to come in internal makes you wonder if it was a real project or it was like they were just putting it out there to see who could write like the solve the chalkboard

problem in goodwill hunting yeah well um i don't know what i you know it's kind of weird like i said it's it's good fortune you don't really know why these things happen and i think these these things that come up in life you can look back and say that was an important point or this was important point that was an important point as well i've been coming to new york quite a bit before that and knew a lot of people in the industry and and now getting up there to be with you know one of the top three funds in the industry and working with one of the most notable managers in the hedge fund industry was was really interesting so I had a I had a really interesting you know brief time there was Jim Rogers there at the same time huh was Jim Rogers there at the same

time no he left way earlier he was I think he was gone in the 80s but um no it was it was sell a whole collection of different portfolio managers. Scott Besson had just left as well, but he actually came back and was working with the Investment Committee as we were looking to allocate capital as well. So it was a fascinating time. Some of the people that we met or some of the, you know, stalwarts in the hedge fund industry today that we put money with. So it was, it was a, you know, one thing it was a fascinating time. But, you know, I knew. I knew, a guy from Nashville who was living in New York. And we began talking about starting a hedge fund of funds. And so I left Soros to help get that going. It's called Titan Advisors. They're still

around today. I was co-founder and CIO of that for about 19 years. We launched it in 2021 and I left in 2019. I bet most people listen to this would take, if you said, are there any fund of funds that lasted over 10 years? Most would probably say no, right? So they're still around. Very competitive space. And we built something really interesting and really unique. You know, we really, there are a few fund of funds out there and a lot of them had money with all the Tiger Cubs. We didn't really have a lot of money. with the Tiger Cubs, not for any particular reason.

They were, they were phenomenal, as everyone knows. We liked a little bit more of an active trading approach. The Tiger guys were a little bit more fundamentals. We liked the combination of fundamentals and trading. So we had a lot of money with Steve Cohen and some of the pro shades that spun out of SAC Capital then, 0.72 today. we did a lot of more things in the commodity space in our macro bucket. So we were really early to some of the natural gas traders in the, in the, in the early part of the 2000 that had done really well. We'd had some money with some of the other big notal commodity traders like Michael Farmer, Red Kite Capital, which is a huge copper trader that did exceptionally well.

Andoran, did you have any money with him? We didn't have money with Anderan. We met with him when he was a blue gold, and we met for him subsequently. We didn't put money there. He was obviously, you know, had an unbelievable reputation as just a, you know, a, a fearless trader in the oil markets. We got that exposure to some other people. We had some money with Clive Capital, which is a guy in Christian Levitt, who spent out of Moore Capital, which was phenomenal. He was based in London.

Anyway, I could go down memory lane with all the different guys. You got a hell of a Rolodex is the end story, right? Yeah, it was, well, it was, you know, what's interesting about the fund of fund seat, which I don't know if people fully appreciate, and I probably didn't as well in terms of looking back. But, you know, in my career, we hustled at Titan. So we were really involved in emerging managers and trying to find people that were new, that were just embarking on their career and starting up the funds. who had great reputations coming out of another notable hedge fund or a bank or some prop desk.

So we met with a lot of people. So I don't know. I've probably met with 3 or 4,000 hedge funds in my career globally from, you know, Asia to Europe. You know, we would, you know, go on a trip and we'd have, you know, five back-to-back meetings with managers in that area for however long we were there, you know, three or four, five days. and we were always, you know, on the road trying to meet different fund managers. And you do that for 20 years. Wow. Just the breadth of the things that you see are pretty interesting.

And we look at things across long short equity and credit and commodities and macro and event-driven and multi-strategy. So you get to see the process that all these people go through. And then you get to see how they manage risk and all these. different ways and how they execute and and all that gives you just a huge lens in terms of of seeing all of things and then it presents like a muscle memory it's like it's no different probably than a private equity venture capital guy that sees a lot of things and there's a muscle memory of if I hear that and I see that you know it triggers a thought that I really want to pull on that thread and learn a lot more same thing in in this fun management world where you know

you meet with people and you hear certain things and you start to connect dots and there's a muscle memory like this feels pretty interesting i want to learn a lot more about uh this person's process did you ever to me i hear 5 000 meetings and i'd be like i think i would have lost my politeness around 1,200 or so right did you sit in about 3 000 i started losing my politeness probably a little bit and there's no disrespect i mean just like hey you can skip those first 10 slides. We've got that. Let's just get to the meat of the thing here. Yeah. And once again, the business has changed so much in the last 30 years. And once again, I mean, you know, all these traders and these PMs that we've talked to, went to great

schools, you know, had great careers at different places. And unfortunately, those things have become kind of table stakes. You know what I'm saying? You have to have that. Okay, you've got what everybody else has now it's how you're doing something differently than the person you went to school with because they were trained the same way you are and this is a competitive space and alpha is actually a rare term not everybody can have it and there's only so much of it so how are you going to get it and maintain it and keep it when everybody you went to business school with that's in the same industry is trying to do the exact same thing you are and then it's like so then it's the

more nuanced things that are really important in this business about, you know, what drives a person? Number one, it's like, you know, what do you want to do? And, you know, what's your ultimate goal with the fund and in return targets and, you know, who are you trying to please with your returns and, you know, how much of your money do you have? And the other little nuanced things is like managing a lot of people. Do you like managing people? Do you not like managing people. How big do you want to get the team? Do you think you're good at managing? I mean, it's all these little things kind of come into the soft part of it. And then you get to the hard part of it, which is they're usually excellent at, which is tear enough part balance sheets and

income statements and finding, you know, opportunities that be on the longtrade equity side or on the commodity side, you know, interesting networks with people in the field that help them to understand locally what's going on with producers and when they want to let. go with their crop or or interesting information in terms of, you know, flows of natural gas or demand or production and what little things are they doing just to try to get an incremental edge that then they can turn into a trade they can construct and a duration of the trade to extract that value. So it's all about, you know, starting with qualitatively, you know,

getting comfortable with the person and what makes them tick. and then going into the process side of, tell me these big things. Process, what do you do? And what in that process is maybe the incremental thing that's a little bit different. Number two is portfolio construction. How do you take that idea and then how do you express it the best way? So is it flat price? Is it options?

Is it spreads? Is it RV? Tell me how you think about that. And risk as it relates to that. And then you go to risk management. It's like, okay, end of the day, what is your risk management discipline, right? For me, it's live to fight another day. Now, that's pretty fuzzy, but it's the most important thing out there.

What are you going to do to live to fight another day? And let's hopefully have a P&L history where we can go through things. And I like to see poor periods because they're teaching moments, right? What happened? You know, what did you get wrong? How did you turn it around to get it right? you know was there one certain thing that kind of led to the to to the poor performance was in an event you know I like to find people that are good sellers and not just good buyers everybody can buy

good selling is hard to find right really really hard to find um so it's it's it's a maze of things I was going to share it quick the uh an option seller guy we work with he says it's like being a pilot he's like no one if you flew 9,000 successful flights, 9,999, and you crashed and killed everyone on the 10,000th flight, right? He's like, no one remembers the other nine. Like, you have to get the plane on the ground safely every time. Like, you can't crash your last time out. Which is somewhat like, yeah, just live to fight another day as well, get the plane on the ground safely.

Yeah. And it's, for me, then it's looking at three key, key risk factors. because I think every strategy has these three and then probably two others. Those three are how much leverage is being used to drive returns. Is there any type of illiquidity? And what is the concentration? The other two things that could be added are complexity and correlation.

Complexity is like a model different strategy, you know, how complex is it? Or if it's something that's depending on a stability of a correlation, holding up you know correlation is you know it's not a number it's a pretty bumpy series over time so it looks like behind you right looks like the graph on your on your background yeah yeah nebulous it's kind of fuzzy like that but every strategy's got one or three of those and i don't like leverage and illiquidity because that's usually a game over event at some point that's when you don't live to fight another day you don't like them together huh you don't like them together No, do not.

Yeah. So then it's like, all right, with futures trading, you get leverage through the instrument, not through financial leverage term going borrowing capital and excess of your capital. You just get it from this thing has got a notional exposure to us. So then it's like, okay, how much margin are you committing relative to your capital, which helps you understand the leverage component of it? And then, you know, illiquidity, you know, for futures it would be your amount of capital you're running relative to the open interest in volume. We don't really have that problem right there, but you don't want to get

to where you're so big in the market where now you are the liquidity and you've got a problem. So that's how we apply to futures trading. What about the complexity? Do you kind of view it as just if it feels too complex to me, that's I'm just putting up a little yellow flag or do you have actual metrics on that? Yeah, no, it's more of a qualitative thing. It's it's thinking about, yeah, how many inputs are used to create it. And that would be more kind of on the quantitative side of things. So something that's more, you know, a model-driven strategy than a fundamental strategy. It's like, you know, how many things go in to try to create your model?

Because the more input you have, then the more, you know, wiggle room you have for mistakes in one of those. And it's just trying to figure out, you know, it's just been in my career, the simpler the strategy and the simple of the model, typically the better. so we need to get to hip so we're getting there um but before we get there so the fund of funds model like during your 19 years it kind of had a boom and then a can we say a bust right like a lot of people soured on it very quickly or maybe that was just the news what what's your thought on why that model failed or did it's it's twofold i think uh number one the multi-strap model really became you know I guess the replacement for a fund of funds. They have better capital allocation because they have,

they can touch the capital immediately. They have better risk control because they can once again manage it on an immediate basis. They've got better ability to pull levers in terms of the concentration and leverage and all the other things in order to get great return. So that model really, I think, replaced the fund of funds model, all while it's being equal. And by the way, they've been general, huh? Some investors raise their hands.

Like, wait, this fund of fund thing is terribly capital and efficient, right? Essentially. It can be, but, you know, not all, you know, it's just like, I don't think you put everything in one buckets. You know, there's still some great ones out there. You know, one of my ex-partners at Titan has got a great firm that he's kind of evolved. It's called Old Farm Partners. It's a hybrid fund of funds model, but he's done a great job because he's, he's, he's, he's,

involved. So I think it's, you know, you just have to figure out how you're going to create value and whatever model you choose. So I think the multistrats competed. And then secondarily, you know, after 2008, there were a lot of people who were in Fund of Funds who then got locked up and some people wanted their capital back. Some people didn't want their capital back. And it just created this, this bifurcation and interest. And then the consultants, I think, who controlled the capital for a lot of these investors started to take some of that control back themselves and felt like they could allocate the capital perhaps better than a fund of funds model or make it more direct. And I also think what's happened is the managed account model has come

on in force the last four or five years where now people, you know, can kind of create their own multistrat by doing a bunch of managed accounts. And I think that's also put a lot of pressure on that model. So it's, I think it's a few things that have kind of done it, but it's not dead. It's still out there, but you just have to figure out how to do it a little bit better. But nowhere in there did you say, like, if you put it into chat, GPT, it'd probably say, right? The Fund of Fund of Funds model died because of an extra layer of fees, too expensive. It seemed like that was in all the headlines, but. They may say that, but, you know, the multistrats aren't cheap either.

That was what's going to be my next thing. They were like just shifted. like well now you don't pay an extra layer of fees but hey by the way you pay their signing bonuses and this and that and everything inside of their performance so it right i think there was an article we'll find a link put in the show notes of like the multistrats are way more expensive it was like 50% of performance or something they are much more expensive but once again they've delivered better returns all else being equal by the way i don't want to make a general comment but but you know it's uh it's it's it is an interesting conversation though when it goes to the fee conversation and the replacement is a is a multi-strap where to your point they're probably a lot more

expensive than yeah but maybe that's because of the capital efficiency too just it looks more expensive on your cash basis all right let's get into hip is it hip or hip we call it hip you know what what's it staying for whatever you like but you know i'm kind of hip so no i'm just yeah you can call it hap um yeah so when i when i left uh when i left titan you know i was i was trying to think about my next endeavor i wasn't ready to to to to quit i had too many things in my head i wanted to get out my covid hit right thereafter so i you know didn't really you know couldn't do a lot for two years because everybody was was kind of um shut down but i was kept thinking about this commodity space and and you know back to your roots yeah

commies kind of been in the dumps you know as you know you know China consumed everything for 2009 through 2010 and what happens then is you get a lot of oversupply because they're trying to meet the the demand from from China consuming everything and then things slow and that you have us oversupply you got to work out over a long period of time so for 2010 to basically about 2020, you know, commodity markets really weren't that exciting. They, they, you know, went down a lot. We were still kind of working through the overhang of the financial crisis and then COVID hits and the, you know, the economy shuts down. Crude goes negative, you know, things you never thought would happen ever. And, but, you know, a lot of these commodity markets take a very long time

to bring on new supply. So when you do have an uptick in demand, now you have the triggers to kind of set for the new cycle, which we'll talk about in just one second. But I just kept thinking about the commodity side. And more importantly, you know, commodity managers are different. You know, they like to be in a room with other commodity managers. The multistrats have been really the spot for a lot of these commodity traders and go. There have been a lot of got out of the market in 2010 to 2020, but the ones that were left going to the multistrats. But, you know, there's been some challenges in terms of some of the commodity traders

being inside multistrats and just in terms of the volatility, the commodity markets can sometimes express relative to the tight risk management that a lot of these multi-strategy funds have. Once again, they're very different across the board, but in general, that's a, I guess a good generalize comment. So we thought, listen, why don't we start a firm for commodity traders and create a multi-strategy commodity-only fund? And I think it actually makes the most sense for commodities relative to every other asset

class for these reasons. Number one, in a single commodity market, you have a lack of breath in terms of how you express of trade. Like for instance, if you want to, you know, usually if you're an oil or gas, you're bullish or your bearish gas, right? Or oil. And so it's kind of really one trade. And you can do it through a curve or whatever, but you're really thinking this part is going to go up relative to this part. It's a, it's a trade. It's expressed through a spread, but it's really a view on one part. We're in a long trade equity portfolio, for instance, you could have 50 names long, 50 names short, and they're all kind of doing different things and get a lot of breath

in that portfolio, you really don't have that in a single strategy commodity market. So breadth can be a problem for commodities. Number two, scale. You know, a lot of these markets, you just can't put a lot of money in. Softs or power or LPG or some of these more nuanced markets, if you're a big allocator and you love to get some money in some of these markets, But your minimum, you know, let's say your minimum investment is $100 million based on the size of your attention, you have a real problem because you can't be the majority of their assets, right? You probably have some restrictions off of that.

Well, if I can put a collection of 10 markets in our portfolio, now I have breadth and I have scale where now if, let's say the average capacity of somebody is $150 million, when we have 10 of them, now we have $1.5 billion of capacity. capacity or scale in a portfolio where now someone could make an allocation and feel comfortable. And then last is volatility, you know, because the lack of breath, if you get the, if you get the trade wrong, it can be kind of spicy at times. People say they like volatility until they don't because it hits them in the face. These commodity markets that we trade are also now correlated to each other. We get about a 50% reduction in volatility in our portfolio, just because it's just because of the breadth in these different markets, which is pretty nice.

So we can give an investor in one allocation, one allocation, one line item in their portfolio with a lot of different markets that hopefully will give them a great risk-adjustive return profile and give them access to a lot of different things. So that was the goal. Let's start a commodity multi-strap because it makes the most sense in commodities for these reasons, and it actually helps investors probably the most for those reasons as well. And you envisioned it as a commodity replacement? Like instead of your passive 5% or whatever you're doing with XYZ commodity fund, you should come in, this will give you some of that

exposure, not directional, but some of that exposure? Yeah, our belief is commodities are actively traded strategies, number one. And the reason why other actively trade is because of the calendar strip, right, because of the shape of the curves that give you either positive rule of times or negative. It gives you, you know, you have replacement or competition between commodities at certain times. So supply demand always has to balance. So they are not, in our view, buy and hold strategies. They are actively managed strategies, okay? And we should be able to, based on the specialists we have, If there's a bull cycle, our traders should be able to see there's a plot of balance,

and we're going to be long now because of that. And conversely, they should be able to get short if all of a sudden we've reached a point where we've come to a price point where there is substitution coming in or there are other alternatives or people just step away because it's too expensive and now things have got to reset. We should be able to capture those as well. But if you look at our portfolios right now, they're predominantly relative value. Most of our guys prefer trading and spread because it's a more fundamentals rate than just taking a directional bet, which is a higher risk. And you've got to kind of be right where spread, you can kind of be a little bit more fundamental.

So since the hip commodity desk launched, it's been about plus or minus 20% net exposure. But we're not targeting that, what comes out of a wash. But different than trend following, right? So the first part of what you said, hey, they can catch this when it's going up. They can go short, right? So most people are going to think, oh, manage futures, commodity exposure through trend following. I get that also. So how does it differ?

You're saying right now, relative value. Well, trend following, you know, kind of takes, you know, either a bull trend or a bear trend. But it's usually, you know, they're typically called long-term trend followers. Now, by the way, this is all very simplistic, obviously. There's great nuances to that as well where they've employed shorter-term systems on top of longer-term systems that we try to manage both. But in general. We've had them all on the podcast.

They know all those nuances, the listeners. Go back and listen to episodes of 100, blah, blah, blah. Sorry, go for that right after this. So anyway, so you have trend following, which is, once again, just trying to capture the meat of the trade, right? that trend. Our guys can do that, but they also be more tactical and capture things shorter term that happen along the way. So like, for instance, our base metals, a precious metals trader is an exchange arbitrage

guy where he's kind of got a core two to three month view on part of his portfolio where he thinks, you know, commodity that trades on both exchanges is really mispriced and it's going to have to converge. But then on a much shorter term basis, day to five days, he trades short-term volatility in those spreads along the way to kind of help manage that longer-term trade that he has in his portfolio. Some of our more fundamental traders, on the fundamental side, the key is, is whether fundamentals are telling them, you know, this is going to go to this price or to this price.

then it's about timing and sizing of that, right? Because sometimes they're earlier those trades because they're fundamentals they're so convinced of that the path really needs to be focused on and therefore they kind of can get chopped around waiting for the turn in the marketplace that makes sense. I think you've told me before the fundamental guys

are usually early, right? they typically are this has been my experience um and they're they're typically a little bit early but they're they're typically right and the key thing is is you know them kind of managing that being early so then they can capture the trend that usually comes from from from behind that so so what will be different so um an index is passive long only um we are going to be active long and short um through a cycle we will be a combination of short-term to kind of medium-term trades where some of the index stuff is longer-term trades if it makes sense from a tax perspective you know we're 60-40 they're 60-40 I mean it's yeah it's no but even in terms of your right you have the multi-strat

ethos of kind of hey this is all going to come together and have very low volatility and drawdowns right like it's that the whole the whole the whole goal here is we have a lot ways to win, a lot of different markets, and we have a lot of different ways to manage volatility because of all those different markets. Because once again, what drives sauce doesn't drive natural gas. What drive base metals does not drive PJM power. They've got different drivers and returns now. They can have, their correlations can cluster at any point in time for whatever reason. It wouldn't be a fundamental clustering and be a spurious clustering it's from time to time. So our job is let's let's let's let's let's let's let's

allocate risks you know equally across these these traders let their opportunity sets dictate what they want to be more risk on or more risk off because as you probably are aware you know there's probably two to four great opportunities in the commodity market in a year and outside of that it's much of noise so yeah you probably try sitting on your hands as much as possible waiting for those great setups if you have your own standard on commodity fund, it's hard to do that because people are expecting you put up returns. Within our portfolio, we actually can encourage someone to say, hey, don't force something that's

not there. These other guys are seeing things to do. Wait, wait for your fat pitch. And then when you see it, you know, take it. And then I'm sure at that point in time, maybe the other part of the portfolio is reducing their risk because they've realized something in their portfolio. So that's the whole goal is lots of ways to participate in different markets, lots of the way, lots of ways to manage risk, hopefully a lots of ways to generate returns in different markets throughout different parts of the year, and gets it in a volatility profile that we think is, is consumable for institutions. Talk a little bit about, right, if I'm, quote, air quotes, normal multistrat, I'm looking

for two, three, four sharps or something to all put together. Do you, and you're, you've told me offline you can share it here right some of the guys you get is because they don't fit into that nice picture um which isn't in our both of our opinions a bad thing they they serve a different purpose but talk how it kind of differs from you guys versus the normal multistrat and just in terms of the risk controls the expectations all that good stuff yeah we'll go back to like ground ground zero so if you took a 10.8 sharp ratio trader so below one. And all those different strategies.

10 individual 0.8 sharps. 10 individual 0.8 sharps. So nobody outstanding 0.8. Eh, that's okay. 0.8, which is about what a commodity trader is all that's being used, usually about 0.8. But all those markets are minus 0.25 to 0.25 correlate to each other. So basically zero, right?

Minus 0.25. You put them together in a portfolio, you can get a 2.8 sharp ratio. Okay? So this is where the portfolio effect has a great influence in terms of your overall sharp ratio at the very end of the day in terms of how you can take some things that are below one, but because their correlation and their different return drivers, you can get actually to an exceptional sharp ratio. So we would love to have a sharp ratio somewhere between one and a half and two and a half with a with a volatility of somewhere between 8 to 12 okay yeah so we would love to on a consistent

basis you know put up mid-teens returns with the opportunity to put up you know above 20 when when the stars align in a few different markets that's kind of what we would like to do now from a risk standpoint you know how do how do we manage the risk for these traders everybody's got a var limit in terms of this is the maximum var you can run and it's 3% 90s 95-1-day var that we use as our measuring stick, okay? So they can go up until that. Most the traders typically consume 40 to 60% of that var. That's kind of their their running, constant running speed.

It's somewhere in that area, if it makes sense. Then we have levels that we have levels that, which we will review with the trader, kind of what's going on in their portfolio. So we're down five. We have a conversation with them. Say, hey, what's going on? So you're down five.

You know, you know, by the way, it's not a surprise just because we have daily calls with everybody. We have a global call across the board. And we have real-time risk systems in our office where we see live P&L. Everybody gets to see everybody else's P&L. So everybody sees everything. So it's not a surprise. It's not like we wake up one day and they're down five.

We're watching it very closely along the way. So a down five will have a conversation. And then if it continues to go down 10, we expect their risk to be cut by about 50% at that point. And if they continue to go down to 15, we want to be out at that point. The whole purpose here is to live the fight another day. You can come back from those levels.

But what we don't want is, you know, someone to get stubborn and hardheaded and really try to fight something that maybe, you know, clearly they're either early to, which is the same thing as being wrong, or they're just wrong, or they're sized incorrectly, or there's something else going on that we need to talk through and see what's going on. And then a plan of attack to get back P&L. so um and so those point eight sharps don't make it at other multistrats it's not big enough who knows you know i think the the the thing that's in my experience what is influenced the commodity guys at multistratts where they get fired is um you know big drawdowns you know they've they've they were given a lot of money and they were um you know you know encouraged to take a lot of risk and it didn't work out and had a big drawdown and they blew through their limits and they were let go um but sometimes they like were forced to take rent like i'm not

seeing anything in this right now like well we need you to have this i'm going to use a different word i'm going to say encourage to take risk yes i'll let you use force but they were encouraged to keep risk at a high level and listen from the multi-stress perspective when you've got it you know Makes sense. $25 billion and, you know, a hundred, 150 traders. I mean, you can, you can absorb, you know, a lot of noise and you just want people to have risk on because it kind of comes out in the wash for them at some point. But they do have a level at which most of them say, you know, enough. And sometimes it's, you know, it's a number.

It can move around, it can move around to some extent. And sometimes it's, it's the path. So, you know, sometimes it's the path that returns being too volatile versus just the absolute number being, being negative. So, you know, if you see a lot of volatility in the P&L path, sometimes that can influence their decision in terms if they want to stay with it or not. So there's just so many different things. But, you know, from my perspective, and to me real quick, why you're thinking of that, like, the, trend following sort of inside the portfolio exhibits the same thing right you're in this silver loses ten times in a row stopped out stopped out over like nine

years why would anyone keep that in the portfolio and then the 11th year it makes 50x or whatever on it's when silver makes a run so similar thing of like maybe they need in this case weeks or months instead of years but still too long for the normal multistrat to endure, right? They want the profits now. Yeah, it's hard. Listen, we're all learning the performance game and it's hard to be patient sometimes. Very hard. I mean, we all have behavioral biases. We all have, you know, pressures from investors and things that we have to do in order to hit our goals. They're just like the rest of us. So I think that, you know, what we just want to do at hip is have a culture where we can let these things breathe enough

with live to fight another day still being the thing we have on our wall right yeah so we have to let them breathe but we can let them breathe within a portfolio of a lot of different strategies so that one shouldn't you know dictate what's going on with the rest of portfolio so we limit the amount of risk any one strategy you can have so it can't submarine everything else and then you you hopefully let the opportunity set, the experience of the traders, the risk management oversight that we have, and the diversification of the portfolio, now help, once again, limit the downside, hopefully, and skew the upside is obviously the goal, is trying to keep that profile.

And then you guys also do a little bit something different in how you incent these guys, right? yeah this is the other big thing about our firm that's that's that's that's different that a lot of traders have been interested in so jim simon said it best he said if you want to create a great firm this is a secret you hire great people you have a great infrastructure you collaborate and you share the profits okay so we're hopefully trying to do the first two now collaboration and sharing what did we do in order to um help that. Number one, collaboration. A lot of people talk about, yeah, we want our people to collaborate. Well, how do you get people to collaborate if there's no incentive to do it?

Charlie Lunger said it best. You show me the incentives and I'll show you the outcome. So the way we've done it is we're not a pot shop. Everybody that's a trader comes as a partner. So it's a past due model, but every trader earns 20%. 15 of that 20. They, get that is not netted against anybody in the firm so it's what they kill they eat 5% goes to the house their partner in the house so why would you want to collaborate with the other nine traders in the room if there was no financial incentive well there is now because now you have a piece of their P&L they have a piece of your P&L so if you see something in their market if they see something in your market if there's something that overlaps you know we should be talking and we

We have a call every day, a global call, to go over all the markets together. By the way, this is what happened at Refco. Willard would lead this meeting back at Refco. I think it started at 7.30 the morning with our meteorologist and went through every market. It's kind of what we do here. We go through every market. The spark call. Huh?

You should call it the spark call. The 10 a.m. spark call. We should call it the spark call. Did anyone debate that and be like, we need the call before the market? it's open or can we do it after lunch? Was there a debate on the time? Oh, yeah. Oh, yeah. And it's probably going to move around some more.

Yeah, because it's never perfect for everybody at a certain time and a certain place. But we decided on this time, my gut's telling me it's probably going to go a lot earlier. But we have calls with individual team members usually before that call to kind of go for markets as well. But the whole purpose is get everybody talking, get everybody talking and hearing what's going on their market. It'll trigger a thought. It'll trigger a conversation. But we force that collaboration through the call and then want them talking obviously with each other afterwards as people that are part of the same team financially incentivized as well. So the collaboration and sharing are tied to

each other through the incentive structure that we think helps. And you know what? I think at the the end of the day you know a lot of our traders have been in the business for you know 20 years and you know at this point in their career they want to build something they want to build something together and they want to work with a group of people where they can you know build something together and once again not not be isolated by themselves trying to figure out everything because it's hard right if you're in a room with other people then it's got a different energy to it's got a different flow to it it's just got a different atmosphere and and it's uh it's resonated how How do you guard against like group think because they're not trading the same things anyway?

So even if they all have the same idea, it's not going to exhibit itself the same? It's exactly right. So we have one crew trader. We don't have five. We have one gas trader right now. We don't have five. The fear is, yeah, if you get five gas traders and one's got the hot hand and, you know, all the fundamentals are pretty obvious, then you just got one big gas bed on rather than a bunch of diversified.

gas bets on. So if we were able to find another trader within a market, we'd really want something with a different approach that gives us diversification of approach versus just that. So if we had a fundamental guy and we had a quantum guy or a quantitative strategy that we thought was different and complementary, that would be interesting, right? Be very, very interesting. But having two fundamental crew traders, I mean. Yeah. But if you found it's more so of like oh you should check the volatility on that on that option spread or something like i just saw it spike in my corn you should check it in oil or right it's more comments like that of like here's what i saw in my space make sure you're looking at it in your space yeah that or even like like like lpg it was

pretty interesting so about a week or so ago our lpg guy was like listen i'm hearing out of the what's lpg for my uh my friend george it's liquid petroleum gas so just think propane. So there are a bunch of associated gases that come from crude oil production, natural gas production. And it's butane and propane and all these other gases. And by the way, we don't we don't drill for that stuff. We just get it from fracking. So in the United States, it's a huge producer. Middle East is a huge producer, obviously because of their production over there. But, you know, our LPG guy was talking about what he was hearing was maybe a lot more production of LPG, which by the way comes from crew production over there, right? Once again,

associated gas. And he was like, you know, I don't know if you guys are hearing this as well on the crew team, but y'all should probably look into this to figure out what you're seeing in terms of your balances in terms of the Middle East, which is pretty interesting. The other thing the LPG guys said was, I mean, this guy's been in the markets for 25 years and he's, you know, and demand has been pretty soft in LPG in general. It's used to make plastics. And he's like, when it's this soft, and I've seen it this soft historically,

it usually tells me we've got a wobble coming in the economy because it's such an important petrochemicals to feedstock to so many things. And you know what? It's like, okay, that's an interesting kind of macro thing to keep in the back of your head because obviously petroleum and a lot of stuff is a tied to GDP growth and demand and things of that nature so it's just you know you just hear comments like that in the room and you just kind of you know sometimes i'll stop the conversation say everybody just follow that in the back of your head it may not immediately apply to what you're doing but just don't forget

what that comment was because it may be important to you at some point along the way so those conversations bring up interesting things like that that from a group of people that have been doing it for a while Like literally some of the smartest commodity people in the world. Yeah. I mean, they've been at really notable places and been very successful at those places. So it's great to hear the comments. And what's happening like the glencores and big commodity houses of the world, the banks, they're all sort of getting out of commodity trading or it's been on a downtrend over the last 10 years?

Yeah, it seems like the banks in general, I mean, I guess two banks in particular are getting out. I don't want to name who they are, but, you know, they've kind of pulled back. I think, I think, you know, the Russia-Ukraine war and what happened on the LME really hurt some folks. And I think that really, you know, lessen the appetite for a few banks in terms of their exposure to the space. Listen, I think the Glencores, the Traffees, the VTALs, the Mercurias, I don't think they're getting out of the business anytime soon. They obviously had banner years, 2020 through, you know, 2023, probably. The last year and a half or so have not been that great. I think the tariff noise this year caused a lot of problems, just because,

a reciprocal tariff would have normally been. They tariff us 10%. We're going to tariff them 10% as reciprocal. But when you start to look at our trade imbalances is what the measuring stick is. Nobody knew what that meant, but boy, its impact on markets was pretty dramatic, pretty darn quickly.

And I think, as you know what combined, Mark, you'd be doing this long enough. Usually when you have things like that, they matter a lot the first time. they matter less the second time and they matter less the third time and then it resolves itself and you get the more fundamental markets I hope we're past most of this and now it's going to be a little less so and get a little bit better as people now can kind of get their heads around what all this means and then how do you how do you get these guys you got to throw them 30 million

signing bonuses or is it getting to like we give a hundred million dollar bonuses at our place so that's how we get them that's like nil system in college sports or what like because you read some of these stuff of these large traders moving around between the multistrats and the numbers are staggering so right yeah props to you for being brave enough to be like oh i'm going to get into this business and figure out how to sign these guys yeah i should have thought more about that before i did because it is difficult. I mean, it's very difficult. It's very competitive out there. There's only a small group of commodity traders, number one. We've lost some to some firms because of the big bonuses that they're able to sign to begin with. And that's fine. You'll be back. You'll be back once

they net you out. Listen, it's fine. Everybody's got to do what they think is best for them. But you know, I think our value proposition is pretty clear. It's pretty distinct. Yeah, okay, I can't give you the big signing bonus up front. I'm sorry. But if you want to be a part of a collaborative team where we're all working together to bring a really unique, a very unique product to the marketplace, which is a commodity-only multistrap, which there really aren't any of. I mean, when I say aren't any, there's less than a handful in the marketplace of a product like this. So if you want to come here, be with other commodity traders, work to build a firm, by being a partner, start with less and hopefully build with more over time. This is a great spot for you.

You know, we know commodities. We've got risk systems that understand commodities. We have a great investor base right now. We think that, you know, we're only limited by the capacity of our underlying traders and the opportunity set in the marketplace. Can't do anything about the opportunity to marketplace, but those come and go. But now it's just about getting really, really talented, talented traders that want to be a part of this. And we're getting a lot of traction and interaction with people we shouldn't be, because we don't have the $100 million check to write somebody up front.

But they love everything else, the rest of the story. They love it. how many do you have now and how many is your ideal we have seven now crude oil lpg pjm electricity natural gas refined products sauce and base and precious metals uh what we would like to have over the next three months and we're in we're in detailed conversations with folks um grains and oil seats so um you know getting someone in that in those markets um We don't have right now. We've got a few different people that we're looking at really different approaches in that market.

We don't have European power or gas. And we're talking to a few folks in that region that would give us exposure to that. And then in the United States, we have PJM power. We'd like to get Erkot, which is Texas. And we'd like to get the West, which is Washington State down in California as part of that. I mean, everybody's read. The Eastcon, Reggie? Huh?

What's the East Coast? It's called Reggie. Reggie is part of that PJM kind of corridor as well. That's kind of more on the carbon side of things. We'd like to get an environmental credit trader. Obviously, they impact all the lives markets. I think there'll be really interesting opportunities there. The power side of things, you know, we've all heard the stories.

I mean, the amount of money we're going to invest in infrastructure and in power generation to meet just the data center demand is pretty profound. AI eats, the data centers eat commodities. Infrastructure eats commodities. Electrification eats commodities. If you are a big believer in that thematic, that narrative, that secular driver, that's, by the way, government sponsored.

I mean, we've got the government buying public companies that are in rare earth metals and things of this nature now. It's kind of interesting. So you've got government sponsorship for a lot of this stuff. At a point in time, you know, you just can't create a new copper mine quickly.

You know, a new copper mine takes 16 years or so to make. And so if you have a really big demand... They haven't made one in about 16 years? Huh? And they haven't made one in about 16 years? Yeah, it's a bottleneck for sure. And it's concentrated in a few regions around the world.

So you have supply chain, potential issues there. You've got protectionism. that could jump in. You've got all kinds of things that could really affect, you know, these markets. If you look at natural gas, which is the baseload kind of energy to kind of help get us to if nuclear is an answer or whatever it's going to be, you know, it's not going to go anywhere anytime soon. We're not going to get off a crude oil anytime soon as well. And we haven't done a lot of, you know, exploration into deep water stuff or the stuff that's more durable

versus fracking, which has got really high depletion rates, and you always have to keep, once again, looking for that stuff. If you look at the grain markets, I mean, they're the cheapest level they've been. I mean, land prices, fertilizer prices, fuel prices, labor costs, all through the moon. And we've got grain prices way down here, right? Very interesting. Maybe I'll save the rain for us. Maybe. But I mean, you just have a, a a collection of things across energy, across ags, and across metals that are very interesting right now. And all of them have different cyclical drivers that, once again, help create a balanced

portfolio within the commodity space. Loom it. No, meats? A meats guy? Love to have some meats, you know. I feel like I'm going to do Arby's. We have the meats. right we want to have the meats here we want to have the meat as well huh and i'm and i'm looking at

those trees behind you need some lumber too do they yeah i guess i guess we could do some lumber um listen we're we've looked at palmel we looked at milk we've looked at you know some other really nuanced um really interesting markets um you know the key thing is we have enough liquidity to to to trade those markets and they can they generate some some interesting P&L. We don't need people that generate, you know, $250 million of P&L in their strategy. But, you know, we want a collection of traders that could do 25 to 50, you know, in their markets. And you put 10 of those together. Now you've got, once again, a lot of ways to kind of get to an interesting rate of return without depending on one to drive the whole thing and be right.

So that's the whole goal here is. And, you know, like any portfolio, like a Titan when we had our fund-to-funds portfolio. If we had 20 managers in the fund, you know, there's probably, you know, six that drove returns in any one year. And then there's probably, you know, seven or eight that they were kind of middle of the road. Then you had a few that were, there were underperforming or losers. But that's a constant way it's going to be here the way I anticipated that you'll have, you know, 60% kind of drive the performance. You'll have hopefully 20 or 30% that are kind of middling. And then a couple of couple of people that are maybe down in the year and that'll get you to an interesting rate

of return. That's kind of hopefully how it will work out. And then do you think this is a good compliment to an institution and I've got an equity basically based multistrat or I've got a, what do we call them, a traditional multistrat to be like, hey, you already know about multistrat. This is a great tap. This is the, I mean, we can go on this for hours and I can get so excited about this conversation. Number one, commodities are woefully under-allocated by institutions right now, okay? Typically, they've been between 10 and 15% right now. I think they have around 5% in terms of their allocation. I believe that's because there's not a lot of options for what they do and how they can allocate. There's some passive indices, but I don't think they're great

active management strategies for what they do. I don't believe. It's my bias, so I'm going to stick with that. So I think they're woefully under-allocated, number one. In terms of what they do for a portfolio, I mean, you know, history is shown and researchers shown, they are non-correlated to stocks and bonds. So they're naturally going to give you a great portfolio benefit, particularly if you're a big believer in stagflation or inflation or de-dollarization or any of the stuff that really could affect, you know, bonds in particular, commodities do. usually do exceptionally well in that period of time. So if you've got a 60-40 portfolio, that 40

may have some noise in it because of all this stuff where commodities would probably really shine from that. So I'm a big believer you can't eat non-correlation, right? You've got to have positive returns. I think we have offensively. We have great opportunities, data centers, AI, de-globalization, all the things that we've talked about are offensive ways through commodities.

You can capture that. Defensively, if you're worried about inflation, commodities are a great thing. You get for free the non-correlation. That's free. You're going to get that no matter what, but hopefully we're going to get returned from this and that you're just going to get a natural benefit from it at a point in time that I think it demands a hard look and it's woefully under-allocated. I like that because most people are selling the thing on the other side.

They're selling the non-correlation in ignoring those pieces. No, you have to I mean listen We all have to Make returns You have to So what is What is it

You're going to make returns off But these things Provide the opportunity Right And by the way We don't need a market To go up We just need volatility

Commodities are trading vehicles They need volatility In those things Yeah Huh? You just need interest In those things To be like

It's a huge run-up It's a huge sell-up Nobody wants it It's back Yeah we just need We just need movement in the commodity is where we can make money throughout the cycle is by having the volatility. As a matter of fact, you know, McKenzie wrote a report probably about a year or so ago

and just talked about how commodities usually do very well in high volatility periods. And by the way, from my experience in my days of Titan, equities do terribly in high volatility periods typically, and commodities have done better. And I was just reading something today, actually. that I think somebody from Bloomberg had put out, but a lot of people don't want to invest in commodities, particularly if they think we're going to recession because they think it's going to,

commodities are going to be affected. Actually, the research shows the opposite. Actually, commodities go up during a recession because they usually have gone down prior to the recession. And then when the recession hits, they're actually going up while everything else is still going down. So it's actually a really interesting dynamic where, you know, commodities actually can be that really, you know, unique thing in the portfolio in a recession that can do well when other things may not be doing so well.

Any other thoughts? We've covered a lot. What else you got? Oh, listen, I mean, I'm super passionate about the space. I think that the next 10 to 15 years are going to be the most interesting of my career. I think that we just have a lot of things we have to resolve in the world. Commodities are at the center of a lot of that. I think this de-globalization trend that we have is an underlying, you know, thematic that affects commodities greatly. And then when you add all the other things on top of that, I think there's going to be that volatility environment to be able to trade underneath a very interesting fundamental. backdrop to be able to capture opportunities. Any thoughts?

As you mentioned, de-globalization, my brain went to. Each region will have their own commodity exchange, their own, which they already sort of do, but it might grow. You might get more liquidity in each region if that happened. You might. And, you know, the biggest one right now, which is a problem is the Sheffey Exchange was in China,

and it creates a lot of difficulty because, you know, sending money to a Chinese exchange, right? But outside of that, listen, I think that commodities should continue to grow here. They're cheap as they've ever been relative to equities, ever, which is really interesting.

Although it might be saying more about equities. Well, it is more of an equity story for sure. Where commodities have been kind of left for dead. as equities continue to go up. But those things, you know, typically resolve themselves. So, you know, in 1970s, they resolved themselves when equities came down, but commodities went up through gold and through oil. From, you know, 1999 through 2009-10, you know, equities were dead flat.

Commodities were up 300% at the top during that period of time. Once again, China was consuming everything. And I'm not making a call on equities. I mean, I have no idea if they're going to continue to go up. up or not, but I do know that there are so many forces underlying this commodity, this commodity opportunity that, you know, once again, I'll say it again, it demands, it demands attention. Because I don't think people are paying attention. It demands attention. That's a good one to close it out on. Demands your attention.

All right, Tom, thanks so much for coming on. Best of luck with everything. I appreciate it. Thanks so much, R.C.M. your time. Let me get my story out. I really appreciate it. Yeah, we'll talk to you soon. You've been listening to The Derivive. Links from this episode will be in the episode description of this channel. Follow us on Twitter at RCMaltz and visit our website to read our blog or subscribe to our newsletter at RCMaltz.com. If you liked our show, introduce a friend and show them how to subscribe. And be sure to leave comments. We'd love to hear from you. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice.

All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference paths or potential profits, and listeners are reminded that manage futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.