Turbo Charged Trend Following: Why Capturing the Market’s Biggest Trends Means Embracing High Volatility | Moritz Seibert & Moritz Heiden | Takahe Capital

Takahe Capital runs trend following at annualized volatility of 25 to 30 percent, roughly two to three times the institutional norm of 8 to 12 percent. The firm deliberately accepts a low Sharpe ratio and rough return profile in exchange for maximum trend-capture strength, targeting high net worth individuals, family offices, and funds of funds rather than institutional allocators who face career risk and board reporting obligations that push them toward smoother, lower-volatility strategies.

The core logic is that most initiated trades become small losers while a small number become very large winners that cover all losses and generate profit. Because it is impossible to know in advance which markets will produce the big moves, Takahe trades approximately 100 markets spanning agricultural commodities, equities, rates, FX, and petroleum, which Seibert considers unusual relative to peers who range from 20 to 35 markets at the small end to 400 to 600 at the large end including cash equities and OTC instruments.

The central strategic debate Heiden identifies is between the Donchian channels camp, which allows winning positions to grow without readjustment, and the dynamic volatility targeting camp, which reduces position size when volatility rises even if the trade is moving in the manager's favor. Dynamic volatility targeting produces a smoother return profile and higher Sharpe ratio, but Takahe views reducing a winning position as a hidden counter-trend trade. Heiden argues that how position sizing is managed over time matters more than the specific entry technique used, a view consistent with what Seibert attributes to Harley Bassman. For multi-year holding periods, whether entry occurs a day or week earlier or later is not material to the outcome.

Allowing winners to grow creates meaningful giveback risk when large positions reverse. Cocoa is cited as a recent example, having peaked near 13,000 dollars per ton before falling to around 4,000 dollars or below, with Takahe holding the long for more than two years. A giveback on a trending position can produce a 3 percent loss at the portfolio level or more, and a fund down 50 percent must return 100 percent to recover, illustrating the volatility drag problem inherent to higher-volatility funds. Takahe does not use resting stop orders with brokers, instead flagging a stop hit and exiting with up to a 24-hour delay, meaning a geopolitical gap event over a weekend such as oil moving 20 percent could cause losses far exceeding the intended stop level.

Takahe treats different points on the oil futures curve as individual time series, running around six oil variations across their models, with some targeting the front of the curve and some the back by design from the model-building stage. When the Iran conflict began, Takahe held positions further out such as December 2026 rather than front-month WTI. The front of the curve went into near-record backwardation very swiftly, and while the December 2026 position made money, Seibert acknowledges it produced substantially less than a front-month position would have. Contracts further out carry less volatility and less beta to front price action, reducing whipsaw risk but also reducing profit potential.

The firm does not fine-tune parameters per market, treating all markets within one system identically to increase effective sample size and detect signal failure faster. Rough rice is cited as a long-standing underperformer that would have been a candidate for removal but then suddenly produced strong returns, illustrating the danger of premature removal. Changing a system because of a recent loss is described as a recipe for disaster because a better-looking backtest for that recent period can always be constructed after the fact. Spread trading systems have not worked well in the current year despite strong prior performance, and Heiden notes that one year of underperformance is insufficient to conclude a strategy no longer works, citing Winton as a cautionary example of overreacting to drawdowns by exiting trend following before concluding the exit was premature.

Heiden observes that Hyperliquid has launched commodity perpetual futures including soybeans, wheat, and natural gas, though liquidity in those contracts is currently negligible. Perpetual futures eliminate roll costs and provide near-constant maturity exposure, and Heiden predicts that if CME and conventional exchanges do not respond with competing products, platforms like Hyperliquid will siphon liquidity and assets under management over time. He draws a parallel to Bitcoin carry on CME, which yielded roughly 40 percent annualized at launch and has since compressed to around 3 to 4 percent, predicting the same compression will occur in commodity perpetual contracts as participation grows. Takahe trades CME Bitcoin and Ethereum futures but is not active on any blockchain-based exchange, and Heiden notes that as a regulated investment manager he would not launch a product on Hyperliquid due to legal and regulatory constraints.