The following extract is a Top Traders Unplugged summary of a conversation between the podcast hosts Niels and Alan with David Gorton, CIO at DG Partners.
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DG Partners represents the boutique end of the systematic CTA universe: a smaller, focused firm where the CIO has direct and continuous involvement in every aspect of the investment process. David Gorton brings a background rooted in the fundamentals of quantitative trading, and DG Partners has built its track record on disciplined application of systematic principles without the institutional complexity that comes with scale.
Conversations with smaller, founder-led CTA managers often reveal the clearest thinking about what actually matters in systematic trend following. Firms of this size cannot rely on brand or distribution to attract and retain clients. They have to be excellent at the craft. Gorton’s discussion with Niels and Alan covers the investment philosophy at DG Partners, how the firm approaches model development and risk management, and what he believes distinguishes a durable systematic programme from one that performs well in benign conditions and struggles when it matters most.
The 2022 environment, in which DG Partners participated in one of the best years for trend following in recent history, provides the backdrop for a discussion about what the strategy actually does structurally and why the conditions of the previous decade were difficult for even the most disciplined practitioners. Gorton’s perspective on the research process, position sizing, and the relationship between diversification and conviction is characteristic of the practitioner-as-researcher mindset that defines the best managers in this space.
Related reading: Read: From Impact to Fractal: How Markets Build Themselves from the Bottom Up