Lawrence D. Hite is a trailblazing investor who actively shaped the upcoming landscape of system trading as early as the 1980s. During his tenure with Mint Investment Management Company, he helped propel the commodity trading advisor to become the very first business in its discipline to report in excess of $1 billion in assets.
In an interview with author Jack D. Schwager for the book Market Wizards, Hite reminisces how he got started in commodities trading. He reveals that his college professor referred to commodities traders as crazy enough to trade on just 5% margins. A sudden realization struck him: it made sense!
While in college, Hite was a rock music promoter and managed musicians’ performances rather than their money. A sometime actor and screenwriter, he eventually got serious about staying with the music business. However, after several incidents caused him to question his career path, he decided to enter the world of investments as a stockbroker in 1968.
It was then that a chance comment made during a job interview set Hite on his path to successful commodities trading: Approach the business as a gambler playing the odds to win, rather than a stock market analyst who stays one step behind the market.
Larry Hite has built a reputation for taking hedge fund management to the next level. He is considered legendary in that he consistently managed to get clients actively involved in the trading method, leading to increased investor commitment to the entire trading process. A 1986 Business Week article jokingly sets him apart from what is termed a stereotypical “wild-eyed” trader in commodities.
The trading philosophy he embraces is as down to earth as it is practical: Larry Hite wants to know what you can afford to lose, rather than what your investment can net him. This differentiates his trading viewpoint from the more aggressive traders who in recent decades managed to reap great profits but also suffer great downward spirals.
Larry Hite cofounded Mint Investment Management Company and carefully grew it into the biggest and most influential commodity trading advisor firm of 1991. Of course, what would a reputation be without the facts to back it up? The Mint Guaranteed Fund – a Series A fund – proved to become a steadily leading frontrunner among 76 other publicly traded commodity funds. Hite also proved that cunning investment strategy, coupled with investor commitment, could benefit more than one fund. The Mint Limited Fund managed to rise 20% in 1986, which also is a rather respectable showing.
Not surprisingly, Hite has been frequently asked to divulge his secrets for success, and one thing that he stresses consistently is the need for diversification and cutting edge technology. Diversification is a means for reducing the risk inherent to trading. Technology, in the form of computerization, largely eliminates the human error component when analyzing data.
Even as far back as 1986 he strongly relied on computer modeling to gain an insight on futures trading in national as well as international markets. Over the course of time, he built a system that placed the investment behaviors of people as a constant, while making the commodities the variables. This simple process ensured not only a clear means of predicting future performances, but also provided him a fairly significant edge when it came to unloading commodities just before they lost substantial percentages of their values.
Hite never diverged from this strategy, and as computers and programs became more commonplace, he upgraded his software to remain on the cutting edge of the business. Back then – just as he does now – he advocated volatility tracking of at least 10 to up to 100 days in order to make an educated investment decision.
In 1994, Larry Hite retired as the hands-on fund manager at Mint. Since his retirement, he has held the position of managing director of Hite Capital LLC.
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