FX MANAGERS JW
Which authorities regulate A. G. Bisset & Co.?
UL
The parent company in the US is registered with the SEC as an Investment Adviser, while the UK subsidiary is authorized by the FSA. The parent is also a CTA member of the NFA, although inactive in the futures markets.
JW
You are in charge of the currency program at A. G. Bisset & Co. How do you describe your investment strateg y?
UL
The strategy is model-driven using models that identify price- trends of 2-4 months in duration, exploiting the fact that shorter- term price-trends mean-revert around longer-term trends. The strategy uses momentum models to identify when a currency is over-bought or over-sold relative to the longer-term trend and, as a result, signals when mean- reversion is likely to begin.
JW
How did you create and develop your current FX management strateg y? Has it changed over time, and if yes, what made you decide to change it?
UL
The strategy was developed in 1983 and has been adapted over
JW Is there a type of trade that you
UL The currency alpha strateg y
FX TRADER MAGAZINE July - September 2011 53
the years to include additional factors such as a shorter-term model that provides a level of confidence
along with rule-
based factors that actively scales positions (adds leverage or scales down to use less than the notional amount). These factors were specifically designed to reduced volatility and downside risk in the alpha strateg y, now in its 9th year.
JW
How do you manage risk in the company?
UL
Risk management is built into the strategy in the sense that the models generate trigger levels that are closely monitored and lead to actions to close out or initiate positions
currencies. Risk is further reduced
by assessing
in individual a
set of
cross-rate signals to determine a currency’s relative strength and hence the size of a long or short position. The positions are then managed with the firm’s shorter- term confidence models adjusting the positions up and down in line with shorter-term price- fluctuations, leading to smoother entries and exits in individual currencies. Leverage is also managed actively and is driven by the number of buy and sell signals in place.
FX
might have used in the past but that you would not repeat today?
UL
The strategy and trading process has remained stable at the core, but the use of leverage has been modified. The current strateg y will use up to 2.5 times, but averages 1.3 times resulting in returns 1.8 times those that are achieved with no leverage at all.
JW
Do you use a blend of strategies or one only?
UL
We apply our models exclusively with no over-ride.
JW
What are the market conditions that you consider ideal, and which ones are the most challenging for the performance of your strategy?
UL
Trending markets are preferred while the few times that currencies are tightly range-bound are the least favorable; there is little opportunity for profit at those times, while the risk of loss is elevated since “whip-saws” can occur.
JW
Can you give us an example of a recent unique winning decision?
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