The UBP UCITS has a high overlap with the flagship, but its equity market neutral strategies trade North American rather than global equities, and it does not trade commodities though commodity signals do inform its macro strategies: the Chilean Peso rallied on stronger copper prices improving terms of trade in early 2022.

Campbell Managed Futures Program (CMF) is a multi-strategy quantitative program without the suballocation to equity market neutral but sharing the other three strategies: trend, systematic macro and short-term trading. CMF also has a US mutual fund ’40 Act feeder (EBSIX) run at slightly lower volatility than the offshore vehicle.

Even Campbell’s standalone trend program: Campbell Core Trend with DRT (Dynamic Risk Targeting) is no longer a plain vanilla trend approach since DRT varies the trend allocation.

“Institutional investors are often allocating to the flagship strategy while private wealth investors are somewhat more likely to invest in the managed futures strategy. Large pension funds are especially keen on the risk mitigating trend following. There are however exceptions to these generalisations and some cross over amongst typical investor bases,” says Managing Director, Joe Kelly. Allocations can be via offshore and onshore funds and separately managed accounts.

Why multi-strategy quant?

Trend apart, Campbell are not actively marketing the strategy building blocks independently, because the firm are strong advocates for the benefits of multi-strategy quantitative investing. Diversification, embedded leverage, risk look-through and trade netting are topics that Campbell has covered extensively in various research papers and interviews. The approach enables efficient use of leverage, capital and margin; transparent real time risk aggregation informs risk constraints and risk dimensionality, and netting generates some savings on trading and transaction costs, as well as potential performance fee savings from netting amongst uncorrelated strategies.

Campbell’s conviction in multi-strategy has been borne out: the flagship has been printing a Sharpe ratio above one, thanks partly to diversification and netting benefits amongst the four strategies.

Increasingly proprietary factors decouple from generic styles

Campbell has not only de-emphasized traditional trend. Campbell’s return streams have increasingly decoupled from other generic factor approaches that can also be pursued through alternative risk premia (ARP) strategies. Analysis shows how CAR has had minimal exposure to Momentum, Quality, Value and Size, which are most relevant for equity market neutral, as well as broader Multi-Factor, Trend and Carry styles.

Indeed, Campbell has moved well beyond generic academic risk premia and built a huge library of hundreds of proprietary macro risk factors, from market to geographic and macro themes, such as central bank hawkishness or easing, and geopolitical factors like election risk. Campbell also measure crowding and overcrowding in overbought and oversold macro and sector level markets. “These factors can be relevant to all strategies and are not a black box,” says Cole.

Innovation and evolution in research: relative value, markets and shorter term

More proprietary factors demonstrate “skill” within the framework of Grinold and Kahn’s Fundamental Law of Active Management, while “breadth” has historically most often been defined simply as the size of the investment universe, but Campbell argue that the number of independent bets can also be increased from other angles including more relative value and shorter-term trading.

Relative value can trade within asset classes, between asset classes, or over term structures as well as trading more non-USD currency crosses. It need not necessarily involve mean reversion models that formed the basis of Campbell and other managers’ early statistical arbitrage programs.

Campbell are adding some shorter-term timeframes down to a few hours, days or weeks, but are not in the high frequency trading space: the average holding period is still from weeks to months. Campbell started short-term trading in 2009, and two of the models have been used since then albeit with some details changed; Campbell has not noticed unusual alpha decay from short-term models.

The investment universe includes around 140 individual derivatives markets, and up to 5,000 single stocks for equity market neutral even after some ESG exclusions. Combinations thereof can also create thousands of “synthetic markets”. Multi-strategy portfolios also include the major liquid CDS (credit default swap) indices as well as developed and emerging markets IRS (interest rate swaps). Programs have also started trading European energy markets where trading is partly informed by weather data. Campbell has additionally traded EUA carbon for several years and has begun to apply macro signals to it.

Further additions can be considered so long as they are liquid and avoid unacceptable counterparty risks. Campbell proceed cautiously and have been testing models on alternative markets and Chinese futures for potential inclusion. “Thematically, we are always interested in adding markets. We are not adding every market to maximize the number for its own sake. We are selective in picking those that could give us some edge beyond simple trend following,” says Cole.

Campbell has avoided cryptocurrencies for the time being. “We have not traded Bitcoin or Ethereum due to some regulatory uncertainty, high margin requirements, and possibly declining decorrelation benefits as they grew larger,” observes Cole. Occasionally markets can be removed. Campbell excluded the Russian Rouble currency in early February 2022 partly based on liquidity concerns, a week or two before it was prohibited. Campbell also ceased trading nickel for a period after the LME cancelled trades but resumed it in 2024.

Campbell has also been avidly exploring alternative data. “We are selective because new data sources can get commoditized quite quickly. Alternative data is only one of many sources of new alpha, which could include investor positioning,” says Cole.

Accelerating additions of models

Campbell adds an average of between 5 and 10 models per year. As of May 2024, there were 144 models in CAR.

Criteria for new models include diversification benefits. New models should not show any meaningful beta to equities or bonds. A trend strategy should have some trend beta, and a macro strategy should do something different.

Quantitative machine learning methods have been part of the toolkit for a long time, mainly applied to shorter term models. “In the short term, Gen AI is more about working more efficiently than alpha generation. It is good to use Gen AI for coding and software engineering to check errors and free up time for higher value work,” explains Cole.

A thorough research process for vetting new ideas and models

In common with many quantitative managers, new models and parameters are approved by humans: by Campbell’s five-person investment committee and a peer review process, but there is no day-to-day intervention in models. A concept might take 6 months to go from an idea to the investment committee though incubation periods do vary.

Collaboration and incentives

All of this is informed by a collaborative culture that embraces diversity of thought processes. “Many pod shops do not collaborate, but we take pride in collective and collaborative intelligence. We generate alpha from having researchers interact in a collaborative way rather than being siloed off. For instance, we have found synergies between short-term trading and macro. And even juniors can have a big impact in a firm with 65 team members,” says Cole.

Diverse thought processes come from a diverse team. Initiatives include STEM programs building a pipeline in collaboration with local minority colleges and the DIME Program (Diversity Investment Management Engagement.) “We maximise high quality hires from diverse and minority candidates who are also the best candidates for the roles. Our senior team make a conscious effort to strip out inherent biases,” says Cole. Three senior women have featured in The Hedge Fund Journal’s annual 50 Leading Women in Hedge Funds report published in association with EY: Chief Risk Officer Grace Lo, Executive Director Cheryl Scungio and the Co-Head of Trading Nicole McLean.

Majority staff ownership

The team now have more “skin in the game” than ever before. CIO Cole has also been CEO since January 2022. The management team also now own most of the equity in Campbell, acquired from Keith Campbell’s family office, which is now focused more on water related philanthropy through the Campbell Foundation focused on the Chesapeake Bay region. “The ownership shift has converted phantom equity to proper equity, formalising ownership and making everyone feel they have more impact. It empowers staff with the responsibility of ownership and now ensures the longevity of the firm, which has been attracting strong inflows,” explains Cole. The transaction has swiftly, deftly and harmoniously handled succession and transition issues that have caused years of internecine rows and rancour in other firms. Campbell as a firm is older than many of its employees and is well positioned for the next 50 years.