As part of our ongoing series, we are pleased to introduce the Hudson Capital Group in this issue's CTA Spotlight. Hudson Capital Group LLC is located in New York, NY with a trading program of Fundamental Strategy.
RJO: We'd like to thank the Hudson Capital Group for joining us. Would you be so kind as to give us a little biographical background on your CTA?
HCG: Hudson is a team of seven professionals led by: Todd J. Gross, Chief Investment Officer and Managing Member, Joanne S. Machida-Spears, Principal, Chief Operating Officer and Head Trader and Tony Corso, Chief Risk Officer
Todd Gross, principal and co-founder of Hudson Capital Group, LLC, has the role of Chief Investment Officer. Mr. Gross has maintained a successful record of trading and risk management in Energy derivatives, both proprietarily and for investors, since 1993. He directs all trading, risk management, research and development for HCG.
Prior to forming Hudson Capital Group, Mr. Gross was Head Options Trader, Global Commodities Division, for Morgan Stanley & Co. He began his career at Cooper, Neff and Associates, where he became Head Trader for Commodities in New York.
Mr. Gross graduated from the Management & Technology Program at the University of Pennsylvania. In1988, he received both a Bachelor of Science in Economics from Wharton and a Bachelor of Applied Science in Systems Engineering from the Moore School of Engineering.
RJO: Please give us a brief description of your trading program – Fundamental Strategy.
HCG: Hudson Capital Group’s strategy is Energy Sector-specific and 100% discretionary. Investments are based on fundamental analysis of petroleum and natural gas supply/demand balances. Strategies are executed in highly liquid Energy futures, exchange cleared swaps, and options on the CME/Nymex and ICE exchanges. In general, the distribution of trades is: short-term 80%, medium-term 15%, long-term 5%. The current team commenced the strategy in January 2008.
RJO: What makes Hudson’s approach different from other CTAs?
HCG: Our core objective is to produce competitive, risk-adjusted returns using alpha-generating events and alpha-generating strategies. The firm’s strategic edge is its unique interdisciplinary approach which combines current fundamentals with seasonal tendencies and market oriented weather analysis.
RJO: What is your minimum capital requirement for your program(s)?
HCG: The minimum capital requirement is $1,000,000 USD for the CPO and $5,000,000 for separately managed accounts.
RJO: What specific markets does your Fundamental Strategy program focus on?
HCG: Our investments are Energy sector specific, and are concentrated in highly liquid / highly transparent Exchange-traded futures and options inNatural Gas, Brent/WTI Crude Oil, and Refined products.
RJO: Have you ever changed your trading model? If so, when and why?
HCG: The strategy we launched in 2008 is an outgrowth of collective trading experience in the Energy markets. Prior to 2008, we relied heavily on weather-driven events; we now incorporate market oriented weather signals into our overall market evaluation. We also migrated to a net long optionality bias as opposed to long only strategies, and increased the number of investments per month which has provided greater upside potential and dispersed risk.
Our overall strategy has not changed since January 2008. We continuously upgrade our supply/demand model. We analyze the fundamental supply/demand balance sheet of petroleum and natural gas, identify market benchmarks, and look for opportunities to exploit our edge against that fundamental backdrop. We are fundamental discretionary traders, so risk allocations change opportunistically.
RJO: In your professional opinion, what is the single most important reason an investor should consider adding Managed Futures to their portfolio?
HCG: Not only as a diversifier to an overall portfolio, but historically managed futures have been anti-correlated to Equities. The space performed well as a whole during the equity meltdown of 2008.
RJO: Would you say your trading program is better suited to be a stand alone or part of a multi-CTA portfolio?
HCG: The answer is investor specific, and our statistics show us to be uncorrelated to equity, hedge fund and commodity indices. Because our strategy it is sector specific, I would either incorporate it into a basket of CTAs, or if the underlying investor is building a basket of Energy via equity names, it should work to diversify that book as well. Finally, if one wants pure energy exposure, then it can stand alone as an energy leg.
RJO: In regards to selecting a CTA or composing a portfolio of multiple CTAs, what piece of advice would you offer to a client?
HCG: I believe the most important parts of constructing a portfolio of CTAs are twofold. First, is to put together uncorrelated CTAs, in the aim of reducing the overall standard deviation and to increase the overall Sharpe. Second is to get to know, and communicate face to face with the management team. Know your manager.
RJO: Again we’d like to thank the Hudson Capital Group for sharing their thoughts and providing some insight for their Fundamental Strategy trading program.
For information on Hudson Capital Group, please contact: Andrew Kaplan, Chief Marketing Officer at 646.291.6871 or
As always, we encourage everyone to check out the website: http://www.rjofutures.com/managed-futures/
In upcoming issues, we will spotlight each CTA to feature their particular area of expertise and the concepts behind their trading program(s). Anyone interested in more information regarding Managed Futures may feel free to contact me at CPeck@rjofutures.com or (312) 373-5338.