Peter Borish Left Tudor Investment to Set Up His Own CTA
Volume 27, Number 3
Peter Borish: Big League Batter
By Ginger Szala
Last year was a good year for Peter Borish. Not only did his college team, the University of Michigan Wolverines, share the number one spot in football, his trading returns ranked Borish as one of the top traders of 1997. The apprentice and right-hand man of Paul Tudor Jones for 10 years, Borish hit the motherlode this year with a 44.56% return on his RBI fund. (Borish notes that 10 years ago, Jones was profiled by Futures as the 1987 Top Trader of the year. For anyone who believes in analogs, as does Borish, thats one intimidating indicator.)
Borish left Tudor in December 1994 to set up his own CTA, Computer Trading Corp., in New York. But unlike his highly discretionary mentor, Borish is a mechanical/systematic trader. "Its not a single system," he says of his program. "Its made up of four systems, each with itw own order entries and stops for losses and profits."
The pattern recognition expert systems differ in time frames and approached. One system is a long-term, trend-following system; one is a counter-trend system; and the other two are shorter-term systems. The longer-term systems hold winning trades for 45-60 days, while the shorter-term ones hold winning trades for 14-20 days. He trades 40 markets, 22 of which are debt instruments and the rest a combination of currencies, metals, non-U.S. indexes and commodities. He doesnt trade the S&P 500, which was a Jones trademark.
"People have enough exposure in the U.S. equity markets. They dont need me to lose more money for them," he explains. "Secondly, particularly European stock markets, which I [trade], are primarily betas of the U.S. stock market, and therefore [I] give people exposure to markets they dont have. Lastly, the characteristics of the S&P from a trading point of view are not very good as to other markets we trade."
His most profitable markets in 1997 were coffee, natural gas, the Japanese yen and the Spanish and Italian bonds. In October 1997, CTC lost money early in the month - largely on the D-mark, in which they were long before the market collapsed, and in the Nikkei and crude oil. But he made money on the big Oct. 27 market move, as his mentor did 10 years ago.
A key to Borishs systems is the open trade equity risk. "Entry is easy, exit is hard," he says. "When [I] make a trade, I [must] determine the quality of the signal, in other words, how many contracts should I buy or sell? And as a trade ages, how do I preserve my open trade equity without automatically taking profits, because the conundrum is if you automatically take profits, you always end up making less money then if you dont. At the same time, your volatility is higher if you dont automatically take profits. So theres your trade off. You have to have a return/volatility is higher if you dont automatically take profits. So theres your trade off. You have to have a return/volatility trade off, and thats where understanding that and risk management come in."
Borish has been blessed with working not only with Jones but Tom DeMark, whose systems he spent tow years studying before DeMark joined Tudor for three years. DeMarks accolades for Borish are many, but he says the key to Borishs success is his understanding of money management, which he incorporated into the systems to make them hugely profitable. Its what Borish keys in on too.
"What distinguishes us is the amount of capital that we risk per trade on any given trade in sonly between one-quarter and one-third of 1% of equity…. We tend to let the trade play out about three days before well move our stops. I know the percentage Im going to lose at the point I initiate the trade. At that point, we give it some time to work out. We move the stops then…[we use only] pattern-based stops or volatility-based stops."
Borish, now with $80 million under management, began his career with the New York Federal Reserve Bank, where he worked from 1982 to 1985, when Jones scooped him up to use his expertise on U.S. current accounts forecasting and trade-weighted indexes. He worked via Jones for the newly created Finex and then worked at Tudor, helping develop systems and run the company until he set up his CTA with Jones blessing. In a business filled with mega-sized egos, does he ever feel overshadowed by Jones?
"I dont think Scottie Pippen feels hes under Michael Jordans shadow," he says. "I was mentored by the Michael Jordan of trading."
Copyright (c) 1998, Futures Magazine