Paul Tudor Jones Strategies | Historical Performance of Paul Tudor Jones' Techniques

After reaping around 19% returns for almost 25 years, building a billionaire hedge fund, gaining 200% in a US market crash as well as shorting the Japanese market collapse in the late 1980s along with other financial exploits, what could be the historical performance of a macro manager like Paul Tudor Jones? This article exposes some data and reviews some historical scenarios where PTJ's techniques returned impressive gains.

Getting to Know Paul Tudor Jones: A Macro Manager And Trend Trader

Paul Tudor Jones is essentially a trend trader, whose strategy seizes turning points in the market. His interests lie in the movements of macroeconomic indicators and their influence on his positions, and how these macro events impact the charts from a technical analysis standpoint.

In the Market Wizards book, PTJ says he is "a slave to the tape," meaning he spends most of his time making technical analyses and comparing current prices to historical prices of securities and assets through Elliot wave regression techniques.

Paul used to write articles under the name of Eagle Jones for his father's financial and legal trade newspaper. When he read an article during college about Richard Dennis, the Turtle Trading Strategy creator who started with $400 and became a millionaire, he said his future was fixed.

The Black Monday of 1987

The 200-moving average seems to be his favorite technical indicator. This tool provided him a signal that he combined with fundamental elements of an "irrational market" in 1987 to predict and embark on a huge short position based on his methodology to gain a tremendous return in the US stock market crash called The Black Monday that tripled the value of his fund.

The Trade In Favor Of US Dollar

In 1992, Paul Tudor Jones was optimistic about the US dollar since the interest rate cuts ended and European interest rates also fell, constricting the disparity between European and US interest rates, which should strengthen the dollar.

But news releases on a weak US economy affected the dollar and it plummeted to a historic low. PTJ lost in that trade.

The Bet Against the US Dollar

Unlike 1992, in 1994, Jones betted against the dollar. Initially, he took a position in favor of a rising dollar against the yen, but there is a story told by Jim Pallota, one of his fund managers, that says: "Pallota called Jones expecting the worst since the dollar plummeted like in 1992, but Jones told him he had woken up in the middle of the night, seen something that changed his mind and reversed his wager so he would make money if the dollar tumbled."

Against Japan

In the late 1980s, Jones noted a Japanese bubble formation due to sharply lowered interest rates. Unlike other managers, Jones predicted with high accuracy the moment the bubble would burst.

This was a conjunction of reversal trend trades in which Jones surfed all the way down the fluctuations of Japanese indexes within declines and rebounds.

Getting to Know Tudor Investments Corp: A $13 Billion AUM Firm

In 1983, PTJ started trading with his firm Tudor Investment. His macro approach grew the fund exponentially.

Jones is a trend trader but he never expected to make a massive return by pursuing a one-shot investment opportunity, even when he has stated: "I consider myself a premier market opportunist."

Instead, his acuity and procedure depended on detailed technical and fundamental analysis and making decisions based on his entire portfolio instead of a single asset.

Let's review some data:

• In 1985, Tudor’s first full year of trading, Jones returned 136%, and 99% in 1986.
• In 1987 Tudor Investment Corp returned almost 200% and a net total of 125.9% after fees as Paul Tudor Jones betted on a big downturn in the US Stock Market, known as the Black Monday.
• In 1990 Tudor Jones' return achieved 87.4% when the market in Japan dropped.
• Since 1995, when Tudor BVI became a multi-strategy fund – expanding beyond futures contracts to include such investments as stocks and private equity – the fund’s returns have averaged about 18% a year as of 31 January 2004.
• By March 2004, the Tudor BVI Fund performed a capital allocation of 10% miscellaneous strategies, 30% global stock, and 60% Macro trading.
• In 2010 PTJ's record of high returns stopped and by 2012 it was delivering 5% on average annually.
• 2013 was better, and his fund reported gains of 14.3%.

In the same year 2013, Tudor Momentum Fund Ltd. delivered:

• 0.25%
• 21.72% in 2014,
• A loss of 9.59% in 2015
• In 2016 4.73%,
• In 2017 11.55%.
• 2018 brought some challenges to this fund as well, as it lost 4.22% through October.
• Tudor Momentum Fund Ltd had a total return of 24.15%, for a compound annual return of 2.24%.
• Its worst drawdown stood at 19.84.

In 2018:

• Jones' new fund that relies on machine-learning algorithms to conduct macro trades gained 13%.
• In 2018, the algorithmic fund in May alone returned 7% making money on global currencies and European fixed income.
• In 2018, by October, Tudor Investment Corp gained 9%.

At the end of December 2016, Tudor Group, a hedge fund holding company that focuses on currencies, commodities, fixed income, and equities, held $39.66 billion in regulatory assets under management.

Actual Performance, Trades, And Diversification

Throughout 2021 to 2023, we can remark on some trades that Tudor investments performed:

• Splunk Inc with 3.54% of the portfolio
• Pioneer Natural Resources with 2.80% of the portfolio
• Nvidia Corp with 1.64% of the portfolio
• Exxon Mobil Corp with 0.94% of the portfolio
• SPDR S&P 500 ETF Trust  with 0.92% of the portfolio
• Meta Platforms Inc. with 0.69% of the portfolio

Conclusion

The historical performance of Paul Tudor Jones is proof of how a macro manager who relies on technical analysis can harvest incredible profits by grounding his decision-making process on fundamental factors like interest rate cuts.

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