“Futures traders and computer programmers share many similarities, the most obvious is their talent for deciphering information. Alejandro Knoepffler, principal of Cipher Investment Management Co. in New York, can attest to this firsthand.
Comparing his first job as an Apple II computer programmer at Shearson American Express to his present profession, Knoepffler says he still relies heavily on his trade deciphering skills.
“Everything I have done for the last 20 years is applicable to what I am doing now,” Knoepffler says.
With a bachelor’s in engineering systems and a master’s in operations research, Knoepffler began his managed futures career developing systems for Mint Investment Management Co.
Following his six years with Mint, in May 1991, Knoepffler joined Metallgesellschaft (MG) Corp. as a consultant to trade proprietary money and build a money management business. After the MG debacle, the firm focused on its core metals and energies business and closed all New York operations, including Knoepffler’s money management division.
MG’s woes led to a new beginning for Knoepffler. “If nothing would have happened at MG, I would still be there trading their accounts,” Knoepffler says…Cipher’s trading diversifies between individual markets, market sectors, systems and time horizons, which include short-term (about two weeks) and medium-term (about two months).
While Knoepffler believes understanding trading diversification is his systems’ best attribute, he also says it’s the Archilles’ heel. “Diversification is great, but you have to be able to manage it.”
Futures Magazine
From Apple II Programmer to Systematic Trader
The parallel Futures Magazine draws between computer programmers and futures traders is not decorative. It describes a genuine overlap in the cognitive skills that both professions demand: the ability to read structured information, identify patterns, and act on what the data says rather than on what intuition suggests. Knoepffler’s first job coding on an Apple II at Shearson American Express gave him the foundational discipline, rigorous, systematic, evidence-based that he later applied to market analysis.
His academic background reinforced that foundation. An engineering systems degree focuses on optimisation: how to design processes that achieve objectives under constraints. A master’s in operations research is the applied mathematics of decision-making under uncertainty. Both are more relevant to trading than an MBA. They train the mind to model systems, test hypotheses, and act on results — which is what systematic trend following demands at every level.
Mint Investment Management: The First Proving Ground
Knoepffler’s entry into managed futures came through Mint Investment Management Co., where he spent six years developing systems. Mint was one of the most important firms in the history of systematic trading, at its peak in the late 1980s it was the world’s largest commodity trading advisor by assets under management. The firm’s approach was quantitative and systematic: models identified trends across diversified global markets, positions were sized by volatility, and the system ran without discretionary override.
Six years at Mint meant six years building and testing systematic trading models at one of the discipline’s founding institutions. The same era that produced the TurtleTrader experiment in Chicago produced Mint’s rise in New York. Both operated on the same foundational premise: systematic price-following, applied with discipline across a diversified portfolio, generates returns over time. Knoepffler absorbed that methodology from the inside, at the firm that was demonstrating it at the largest scale in the world.
The Metallgesellschaft Debacle and Its Lesson
Metallgesellschaft’s near-collapse in 1993-94 is one of the most instructive risk management failures in derivatives history. MG’s US subsidiary had sold long-term fixed-price contracts for oil to customers and hedged them with short-term futures positions. When oil prices fell, the short-term futures generated enormous margin calls. The firm could not meet them. A $1.3 billion bailout followed. The New York operations, including Knoepffler’s money management division, were shut down.
Knoepffler’s observation; “If nothing would have happened at MG, I would still be there trading their accounts” is one of the more candid statements in the profile. He did not leave because the opportunity was better elsewhere. He left because the institution collapsed around him. What he did with that forced departure is the relevant point: he built Cipher Investment Management and constructed a multi-system trading operation that diversified across markets, sectors, systems, and time horizons. The MG lesson was not lost on him. He had watched what happens when a firm concentrates risk in a single strategy with insufficient margin capacity. Cipher’s architecture was designed to avoid that failure mode.
Cipher Investment Management: Diversification as Both Edge and Challenge
Knoepffler’s description of diversification as both his system’s greatest strength and its greatest vulnerability is one of the most honest things any systematic trader has said about the practical realities of multi-model portfolio management. The case for diversification is clear: spreading exposure across uncorrelated markets and time horizons reduces the impact of any single bad period. A trend following system that trades currencies, bonds, energies, and agricultural markets across both two-week and two-month horizons will not have all its positions move against it at once.
The case against or rather, the challenge of, extensive diversification is equally real: managing it requires infrastructure, discipline, and the ability to hold many positions at once without losing track of the aggregate risk. A trader who is diversified across twenty markets and three time horizons has hundreds of open positions at once. The TurtleTrader rules addressed this through position sizing and portfolio-level risk management: each position is sized relative to its volatility, and total portfolio risk is capped regardless of the number of open positions. Knoepffler arrived at the same structural problem and built Cipher around the same solution: systematic diversification managed through a disciplined risk framework.
Frequently Asked Questions About Alejandro Knoepffler
Who is Alejandro Knoepffler?
Alejandro Knoepffler is the principal of Cipher Investment Management Co., a systematic futures trading firm. He began his career as an Apple II computer programmer at Shearson American Express and holds degrees in engineering systems and operations research. He spent six years developing trading systems at Mint Investment Management before joining Metallgesellschaft Corp. in 1991. After the MG debacle forced the closure of his division, he founded Cipher.
What is Cipher Investment Management?
Cipher Investment Management is Knoepffler’s systematic futures trading firm. It diversifies across individual markets, market sectors, multiple systems, and two time horizons; short-term (approximately two weeks) and medium-term (approximately two months). The multi-system, multi-horizon approach reflects both the lessons Knoepffler absorbed at Mint and the risk management thinking he developed after the Metallgesellschaft collapse.
What was the Metallgesellschaft debacle?
Metallgesellschaft’s US subsidiary sold long-term fixed-price oil supply contracts and hedged them with short-term futures. When oil prices fell hard in 1993, the short-term hedge positions generated margin calls the firm could not meet. A $1.3 billion bailout was required and MG restructured, closing its New York operations including Knoepffler’s money management division. It remains a benchmark case study in derivatives risk management failure.
What is Knoepffler’s connection to trend following?
Knoepffler’s entire career is built on the systematic trend following framework he absorbed at Mint Investment Management. Cipher trades diversified futures portfolios across multiple markets and time horizons using systematic models; the same foundational approach that defines the trend following world. His comment about diversification being both the system’s best attribute and its greatest challenge is a precise description of what every serious trend following portfolio manager faces.
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