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TRADERTALK


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1. What do I expect from adding an FX program to my portfolio? (diversification, return, liquidity, cash management)?


2. Do I feel comfortable having all FX exposure with just one manager or do I prefer to limit single manager risk by investing in multiple managers?


3. Does the program have an attractive audited track record that matches my expectations?


4. Does the manager have the set up to manage my money properly?


5. Do I believe in the manager’s ability to earn money on a sustainable basis?


How do you approach the selection process as part of your internal FX multi-manager program?


Basically ask ourselves these same 5 questions. First, we start with a thorough systematic qualitative and quantitative due diligence process. We want to know the people who are responsible for the strategy and monitor them for an extended period to make sure they are able to fulfill our expectations. In the end we invest into people and therefore want to know them personally, see their offices and talk to them. To back our impressions we start with a small allocation which allows us to track a manager’s positions and risk management. As we only invest through managed accounts we get the full transparency needed. As our FX-MMP is a diversified multi-manager program we use a systematic process of constructing our portfolio accordingly. Te final call whether a manager gets a substantial allocation is taken by our investment committee which meets, at least, on a monthly basis. Over the past few years the core portfolio has been very stable meaning that most managers have been part of the portfolio for a long period.


What strategies are used to make up the Quaesta v-Pro FX Volatility Program?


v-Pro is a long/short FX volatility program. Four different volatility strategies are adopted in order to achieve stable returns in various market environments.


Relative and absolute value strategies Tis strategy takes advantage of the shape of volatility surfaces. Spreads in various volatility matrixes and currencies are traded. Also volatility is bought or sold outright if prices do not properly reflect market environment.


Time decay strategies


Tis strategy takes positions to earn time decay, usually via exotic options with a limited downside. Te portfolio is constructed to perform in sideways markets.


Carry trades via options


Tis strategy enters into positions in carry currencies with a clear risk/return profile. Again we exclusively use option strategies which show no bad exit risks. As a result this strategy earns the benefits of interest rate differentials and skewed volatility curves with limited risk involved.


Directional Trades


Tis strategy takes long only positions in options via low delta contracts to profit from directional moves in spot. Risk is limited to the premium paid.


How would you describe your philosophy and approach to the currency investment process?


We use a blended approach on our trade idea generation: Potential profitable trades are identified


180 | april 2011 e-FOREX


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