Futures trader John Henry, who parlayed a knack for blackjack into an investing system to make billions of dollars, says he is sticking with his trend-following strategy even though it has not worked well lately.
Everything in life has trends, Henry, who is also principal owner of the Boston Red Sox baseball team, said on Monday during a talk at the MIT Sloan School of Management. People's expectations trend and you can take advantage of that.
Henry's investing firm, John W. Henry & Co in Boca Raton, Florida, oversaw $276 million at the end of April, according to the firm. That is down from about $2.5 billion the firm managed back in 2004.
Steep losses in 2005 and 2006 drove many investors away. The next few years were better, but the firm's largest fund has lost almost 22 percent over the last 12 months through the end of March even as the stock market rocketed up 50 percent.
The GlobalAnalytics fund, which invests in futures contracts on everything from the price of gold to corn, wheat and hogs, has gained an average of almost 11 percent a year since it opened in 1997.
Henry's longest-running fund, which concentrates on metals and financial contracts, has gained an average of almost 21 percent a year since 1984.
Henry, 60, said he still rejects investing strategies that try to forecast fundamental factors like supply and demand.
I know very little -- I can't predict the future, Henry said. Though he conceded that his aversion to weighing the fundamentals during certain periods, it's a disadvantage.
After a stint trying to outsmart the Las Vegas casinos at the blackjack tables, Henry became interested in analyzing futures markets when he inherited the family farm at age 26.
Henry's trend-following algorithms are based on price patterns he studied going back centuries, he said. I did research all the way back to the 12th and 13th centuries -- any market I could find, he said.
Asked if he had any views on financial regulatory reform, Henry had little to say, sticking to the markets he knows best. A movement to put derivatives on exchanges or at least have a clearinghouse is a very, very positive thing, he said.
NO SOLACE IN BASEBALL
Henry's baseball team has not performed much better than his investment portfolio. With a record of 11 wins and 14 losses, the Red Sox are mired in fourth place in the American League East after being swept in a three-game set in Baltimore by the lowly Orioles for the first time since 1974.
While acknowledging that part of the team's rough start was due to unexpected injuries, Henry was unsparing in his criticism of the team's overall play.
If you don't play the game intelligently, you can have all the talent in the world and not make the playoffs, he said. We haven't done a good job this year,
Asked about a recent suggestion that St Louis Cardinals superstar Albert Pujols was worth a $50 million annual salary, Henry did not disagree.
If anyone is, possibly Albert is, he said. Whatever the market will bear is what should be paid. I've never felt we had an overpaid player.
(Reporting by Aaron Pressman; Editing by Leslie Gevirtz and Steve Orlofsky)