Northern Trace Capital

Formed in 2017, Northern Trace Capital is an Ohio-based commodities hedge fund manager that focuses on fundamentals and invests in liquid commodities futures across 15+ markets. The approach is based on having a deep understanding of the supply and demand fundamentals of each commodity market and relies heavily on data science and machine learning tools. The diversified portfolio is a combination of longer-term fundamental discretionary ideas and a shorter-term fundamental systematic trading system. The team started the fundamental systematic trading system buildout in 2015 while at Taylor Woods (a Blackstone seeded fund), based on the belief that using fundamental factors to establish systematic relationships vs trend factors used by CTA’s would be a more effective predictor of front-month commodities futures prices. After a couple of years of building and testing, the firm added the machine learning capability to process. The view is that machine learning is simply a tool that enables the evaluation of more data and more markets in a much shorter timeframe. In January of 2019, it began managing a significant percentage of the capital using the fundamental systematic trading system to capture opportunities in front-month commodities futures contracts. The risk capital target split is roughly 50% NTS (Fundamental Systematic Trading System) 11 day average holding period and 50% in 2 to 5 discretionary trades i.e. UK Nat Gas NBP, WTI, or Base Metals. The discretionary portion takes a longer-term 3-18 month structural view and trades the 2-12 month contracts. The way to visualize the investment approach is to think of a trading desk with 25 discretionary traders, but only one is a human (the CIO), the other 24 are machine learning traders that can process vast amounts of data and trade on what they predict is going to happen tomorrow.Read more ⏷