The Unlikely Duo Behind Briarwood's Success

Briarwood Capital Management's remarkable performance in 2009 caught the attention of many investors, but what makes their story even more intriguing is the unlikely duo behind it all. Daniel P. Collins and his team at Briarwood have been trading with a unique approach that has yielded impressive results.

Collins' background as a coffee trader on the Coffee, Sugar & Cocoa Exchange and Fred Schutzman's expertise in technical analysis might seem like an odd combination, but their differences actually turned out to be a strength. "Freddy and I are opposites," Collins said. "He likes peace and quiet, I am the trader, the extrovert and loud guy." Despite their differences, they formed a successful partnership that eventually led to the creation of Briarwood Capital Management.

A 20-Year Collaboration Yields Results

The chance meeting between Collins and Schutzman in the late 1980s sparked a 20-year collaboration and friendship that would eventually lead to the development of Briarwood's trading program. Their first trade was a simple one, with Collins being bullish on 30-year bonds and Schutzman pushing for a stop-loss order. This exchange marked the beginning of their learning curve, as they worked together to develop a systematic approach to trading.

Their collaboration was not without its challenges, but it ultimately paid off in 2001 when Briarwood launched its first program, which traded three systems: a long-term and two intermediate systems. Two of these systems were trend following in nature, while the third used pattern recognition. Schutzman credits their success to Jesse Livermore's pyramiding approach, but notes that they adapted it to avoid volatility.

A Risk-Managed Approach

Briarwood's program is notable for its risk management overlay, which was developed by Collins' need for shorter-term trades and his desire to avoid holding positions too long. "Me being the floor trader, I have more of the shorter-term mind set," he said. When markets go up hard, they often come down just as hard, and Briarwood's approach is designed to take advantage of this pattern.

Their risk management overlay tightens up trailing stops or takes profits when risk becomes too great. This simple yet effective approach has allowed Briarwood to maintain a solid risk profile and achieve double-digit returns since 2001.

Implications for Investors

The success of Briarwood's program should not be seen as unique, but rather as an example of what can be achieved with the right combination of technical knowledge and trading expertise. What's interesting is that their approach is not complex, but a simple combination of Schutzman's technical analysis and Collins' trading experience.

Their models have been successful in various market conditions, including the difficult environment for trend followers in 2009. Briarwood's X2 program returned an impressive 22.02%, while their standard low volatility program earned 8.77%. These results demonstrate that a systematic approach can be effective even in challenging markets.

Takeaways and Actionable Insights

For investors looking to replicate Briarwood's success, it's essential to understand the importance of risk management and the need for a combination of technical knowledge and trading expertise. By adopting a similar approach, investors may be able to achieve better results and reduce their exposure to market volatility.

Moreover, Collins' emphasis on the importance of simple models is worth noting. "When I was a technical analyst all of the top technicians used simple stuff," he said. "Speak to any of the top traders and they tell you simple is better." By keeping things simple, investors can focus on what really matters – achieving consistent results in an ever-changing market.