We have been running a multi-strategy portfolio with the following core strategies:
- Global Long/Short Equity: Uses bottom-up technical and fundamental analysis to select stocks to go long or short. Diversified across hundreds of stocks (currently ~1,200 stocks long by ~300 stocks short), across all sectors globally (Americas, Europe, Middle East, Africa, Asia, Australia). Variable directional bias (net long, flat, or net short) derived bottom-up, depending on prevailing market conditions.
- Credit: Uses top-down technical and fundamental analysis to go long or flat US high-yield corporate bond indices via ETFs.
- ETF Arbitrage: Uses quantitative techniques to arbitrage structural inefficiencies (daily re-gearing, yield of underlying securities or derivatives, tax treatment, fees, borrowing costs, etc.) of certain ETFs. Diversified across ~20 US-listed ETFs.
- Global Macro: Uses top-down technical and fundamental analysis to select global markets (via ETFs) to go long or short. Diversified across many global markets and asset classes (Equity Indices, Fixed Income, FX, Commodities). Variable directional bias (net long, flat, or net short) depending on prevailing market conditions.
Our strict risk management policy incorporates the following factors:
- Position limits: The initial and current size of every position in all strategies is within “hard” limits (which vary depending on the strategy).
- Asset class, Sector, Country limits: “Soft”; they are monitored to ensure diversification; when breached, relevant exposures get reduced.
- VaR limits: Every strategy and the overall portfolio have hard VaR limits.
- Stop losses: Every position in all strategies is protected with a hard stop loss. Every strategy is also protected with a hard stop loss.
- Stress tests: Every strategy and the overall portfolio are routinely stress-tested under various scenarios to identify potentially large risk exposures.
- Liquidity limits: The liquidity of every position is constantly monitored and the position gets reduced or exited if its liquidity drops below a hard limit.
- Counterparty monitoring: The financial health of the brokers where the accounts are held is constantly monitored using objective metrics (stock prices, CDS spreads, credit ratings). Brokers get replaced if their financial health drops below predetermined hard limits.
Please feel free to contact us for additional information.