Futures WealthBuilder goes private

Don’t know if anyone else noticed already but FWB went private today. It took a beating in February (56% DD), basically blowing up.

Kinlay’s other strategy, Volatlity ETF Trader, has been struggling for the past 6 months too.

Keep in mind these strategies were developed by a manager with a long career in the business. C2 is probably small potatoes to him. I subscribe to his newsletter and have been reading his blog for a while now. There’s a lot of really good content on there and he’s obviously very capable and skilled, but somehow there’s been a disconnect with his performance on C2. It’s disappointing to see.

I guess the point of the story is that in this business take nothing for granted, at face value, and always, always, always do your homework re: risk management.

1 Like

Were you a subscriber? Do you know how much average leverage he used and if the Sharpe and other ratios you mentioned in the other post gave warning signs to this happening?

I was. I was scaled at 100% and most days he had 1 to 3 contracts open, but in various instruments, some with very different volatility profiles. The most common were ES, ZB, and EUR. It’s private now so I can’t look but IIRC the recommended starting capital was $60k. That would work out to leverage around 4 or 5x if you assume a couple of ES contracts were held in the account, using S&P around 2700. It’s not conservative by any means, but for a futures strategy it’s also not all that aggressive.

FWB’s Sharpe ratio was consistently high (>2.5) for the first 9 months, until the February collapse. The strategy developer wasn’t explicit about whether or not stops were used or if any kind of individual trade loss-based risk management was in place. Normally that’s a checkbox item for me (or red flag if it’s missing) when I’m looking at a strategy, but in this case I let it slide because his experience and modeling prowess seemed impressive and I couldn’t get him to respond to my questions. In hindsight now it appears the FWB machine learning model issues entry and exit signals and there’s no individual position risk management in between. On top of that there’s also no intra-position correlation management either. On the day of the Feb blowup the strategy was long 2 ES and short 1 VIX. That’s a good amount of long stock market exposure, with a concave payout to boot in the case of the short VIX position, to be riding on an $80k account during a market crash.

Futures Wealth Builder from Kinlay blog

Lesson learned on my part.

Kinlay pretty must lost all his credibility 2 yrs ago with his “HFT Scalping” strategies. All he did was buy at bid and sell at ask, gaming the c2 system. When you subscribe to his strategy, all you get is 10 trades a day losing money by buying at ask, and sell at bid. Later when you complain to him he send you his website and tell you to open an account with his hedge fund w/ minimum of 250k. Now his wife, which is his assistant at his “hedge fund” just send you marketing PDF and perfect backtest graph via email, so you will give him 250k to invest. I first reading his articles on Seekingalpha, great writer and really knows his stuff. But i haven’t hear any good result from any subscriber on c2 or a couple real investor on his hedge fund. When i talk with a couple investor on his hedge fund, they said the result was NOTHING like what he promoted on seekingalpha, which he promote hes avg gains were 50-100%+ gain per yr with less than 5% draw down. if you look at his result/backtest, its just too perfect! if he is that good, why would anybody need to promote or be public? just go work for Bridgewater or any of NY hedge funds. If you also try to research his background online, his not register with SEC or FINRA or CFA. nope nada. Finra requirement is 25M AUM required to be licensed and registered, SEC require 100M AUM to be registered.

everything about this just didnt sit right with me. because even my neighbor who is a friend/family only manager is licensed and register with FINRA.


bingo. if it is too good to be true, it probably isn’t true.

1 Like

Thanks, that’s good info. I didn’t go anywhere into that level of due diligence on him, and I guess the other subs didn’t either.

As an interesting sidenote: I think the too-perfect results he was showing on his site and by email were for his high frequency strategies. If you looked at the stats more closely, it turned out that the edges were surprisingly mediocre (~55% winners, 1.1 win/loss ratio) but the too-good-to-be-true performance was at least mathematically possible because of the extremely high trade frequency…10-20 trades per day.

This would be the law of large numbers at work. Trade frequently enough and you can recover from just about any drawdown within a few days, even if your edge is modest.

Like you said though, and I think he even said something like this on his own website once, this type of HFT performance is rarely seen in public for the simple reason that these strategies don’t need outside investors. You could just trade your own money and get rich pretty quickly.

I was part of the hedge fund last year, I quit because it lagged behind the S&P

i have tried HFT funds or so call algo driven manager. (real algo/hft, so many on c2 is call their strategy is algo driven. Its so easy to tell its not algo driven when you look at their trades spread/time between trades. they said its algo driven, but is just a marketing gimmick. 90% of them are just discretionary trades)

With my prev experience with HFT/Algo funds, the result like you said 50-55% winner BUT you dont get 50-75% gain per yr. Just because you trade high quantity you DONT capture all the gains and have no downside capture. example of one HFT fund i tried, the avg gain was $80-120 gain per trade, but the losing trades were around $50-100 per trade. I had this strategy in 2014 and 2015, i think the avg gain for me was 20% annually net of fees. i think the worst draw down was around 8%.

there is NO holy grail in trading, either you are a trend trader or contrarian trader, either you are high win rate with bigger loser than winner, or low win rate with bigger winner > loser. i have tried every “sexy” strategy out there. including forex, options, futures. what i learned is being diversify and ride a trend while is hot! I look at this like my golf swing, buying new drivers and clubs every year, like i will find the ultimate club. in the end, i know i should just spend the money to play more or on lessons.


Just curious…how frequently was the HFT fund you were invested in trading?

By your numbers the avg win: avg loss was somewhere about 1.2 to 1.3 maybe. Let’s call the win rate 52%. That gives an expectancy of 0.17. Trading 10x per day and risking 0.05% per trade would give an uncompounded annual return of ~20% or so. Was that roughly in the ballpark of what this HFT fund was doing?

Why did you quit this fund? A return to drawdown ratio of ~3 isn’t bad.

it was nothing crazy like what they said on CNBC. it was definitively algo driven, it was trading about 1 trade every 3-6 mins. YM future wave theory algo driven. the concept is enter trades when a bottom curve of a wave is formed, and exit/short when a top wave is formed. its not anything from MIT quad dept or too complex. I monitored it for about 10 days straight and watch each trade (trying to figure out their secret sauce). The “algo” measures the curve the the wave at a x degrees. sound simple and definitely doable my self. but i dont have 22 hour a day glue to monitor trading futures 5 days a week. but the degree of the curve and what tick of the chart they use is what i cant figure out. i thought i figured out a couple time, I was spot on guessing when they will enter a trade on a 2m chart for 3 days in a row, but they changed to a 89 tick waves the day after.

reason i stopped because making 20% a yr is just too blah for me, i can trade my self make more than 20% a yr why pay someone ? but if 1 day i have millions and want to just play all day. ya, then i wont mind letting someone take 4/20% off my gains. i’m still in the growing phrase of my assets. completely different mind set when u have 20 million vs 200k.

1 Like