After leaving his position as president of John W. Henry & Co. in 1993, Ken Tropin found himself contemplating his next steps. He met up with Mark Dalton, who at the time was the president of Tudor Investment Corp. — a hedge fund Tropin knew well from years of working on Wall Street — for dinner at an Italian restaurant in Greenwich, Connecticut.
“What are you going to do?” Dalton asked. When Tropin said he didn’t know, Dalton suggested he either come work for Tudor or start his own fund, with Tudor as a strategic partner.
“I was flattered,” Tropin says. Tudor was already one of the biggest names in what was then a small, boutique world of hedge funds. But there was just one problem. Although Tropin had spent years around legendary managers, including Paul Tudor Jones II, Moore Capital’s Louis Bacon, and Bridgewater’s Ray Dalio, he had never traded or built a managed futures system.
“And I said, ‘Well, Mark, I would need to invent trading systems, which I have some ideas about. But I can’t say that I’ve ever coded before,’” Tropin recalls. Soon Jones himself got involved in the conversation. “Paul sort of put it up to me and said, ‘You’re saying you can’t do it?’ And I was like, ‘I didn’t say that.’”
The challenge was on. Tropin hired a consultant to teach him how to code, ultimately developing the trading systems that would become the foundation of his hedge fund, Graham Capital Management.
Many trend-following managed futures firms use systematic momentum trading amped up with leverage, but Tropin designed his systems to begin reducing risk before trends become overextended and reversed. “It was a less volatile way of investing,” he says — and one that he thought would be more appealing to institutional investors, which were still a small part of the hedge fund universe at the time.
Jones was impressed, Tropin remembers: “He took a look at the systems and said, ‘This looks amazing. Let’s go.’”
To read more about Ken Tropin’s career from would-be sculptor to hedge fund billionaire, please continue here:
https://www.institutionalinvestor.com/article/ken-tropin-plays-long-game-graham-capital
Michelle Celarier 