Alpha Three Minutes With Nathaniel Polachek, Portfolio Manager And Partner At Commodities Asset Management

A Rabbinical Studies Major Pivots into Quantitative Trading

by Jessica Darmoni
Draft


“I don’t come from a traditional finance background,” said Portfolio Manager and Partner at Commodity Asset Management, Nathaniel Polachek. “My hobbies include applying statistical formulas to NASCAR races and watching the top 100 films of all time.”

As a new entrant to Hehmeyer Capital Management’s portfolio of program managers, we were curious to learn more about Polachek’s background and interests.  We sat down with him to talk about trading, the markets and his interest in NASCAR racing.

A Non-Traditional Background

“I initially got into trading and investing while I was in college.  I was studying to be a Rabbi at Yeshiva University in New York but realized I was more interested in investing,” he said.  Polachek has since received his Series 3, 7, 24, 55, and 63 licenses.

With a passion for quantitative analysis, Polachek started utilizing multifactor statistical models to forecast NASCAR race outcomes.  He has ranked in the top 1% worldwide of determining race outcomes.

“NASCAR is very highly regulated compared to horse racing which has a ton of variability,” he said.  “Amongst other factors, you look at the length of the track, weather and pit crew.  For example, measuring the average length of each team’s pit stops is one key area of differentiation.  Combining these factors can help you predict not only the winners but how the mid-tier drivers will perform as well.”

A Career in Derivatives

After college, Polachek was hired at Spear, Leads and Kellogg, which was acquired by Goldman Sachs shortly after he joined the firm. 

“This is where I got into derivatives and options trading,” he said.  “I worked there for about seven years before moving to Bridgewater Associates and AQR Capital Management.”

Polachek always had an interest in commodities.

“It’s a niche sector and an area that still has edge in the market,” he said.  “A lot of the larger funds don’t really focus on industrial metals like tin, zinc and lead.”

With ambitions of starting his own fund, a friend of his introduced him to Jonathan Tulkoff whose skills complemented his own.

“My business partner brings extensive commodities knowledge and I add the quantitative approach,” he said about launching Commodities Asset Management.  “Being active for over 25 years in the commodities space, we are able to leverage a really big network of buyers, shippers and intermediaries.”

Trading and Investing in Industrial Metals

As far as trading commodities on the London Metals Market, Polachek says they take a fundamental approach.

“We do look at technicals and try to read where the buyers and sellers are in the market, but at the end of the day it is the fundamental factors that drive our investment decisions,” he said.  “The other side of it is quantitative data and imagery to track supply and demand. We rely on overall market intelligence and our network as well.”

While Hehmeyer Capital Management is focused on Polachek’s futures only program, Commodities Asset Management also has a co-mingled fund. 

“This fund is where we trade equities and make both long and short investments in lesser known commodities like beryllium and concrete,” he said.  “It’s important to note we trade and invest.  The trades are more short term in nature and the investments have more long-term potential.”

According to Polachek, overall Commodity Asset Management has $20.8 million assets under management, up almost 10 fold from the $2 million they launched with about two years ago.

“We are also focused on risk management, which is another piece of the puzzle.  We do a lot of work with Monte Carlo simulations,” he said. “We look back at historical data and run upwards of 10,000 simulations on our portfolio trying to see unknowns that could impact our positions.”

Commodities Asset Management is one of the many niche asset managers that Hehmeyer Capital Management includes in its portfolio of program managers.  If you are interested in learning more please visit www.Hehmeyer.com and register for access to the Investment Platform.

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