TRADERTALK
management parameters have already been completely integrated into our investment process so my job is to ensure the portfolio is in compliance with our programmed risk parameters. In terms of disaster recovery, our business is securely and completely in “the cloud” allowing us to access our trading systems and real-time position monitoring from anywhere in the world at any time. Our primary system operates out of NY4 in the US and our back-up roll-over system is based in the London area.
How would you describe your investment philosophy and what do you consider to be the key strengths and operational advantages of Eleuthera Capital’s investment services?
with Newscape Capital, a London-based investment group, where I am Chairman.
Who are the key members of your team and what are their main day to day activities?
Riadh Fessi, my partner for six years, is in charge of trading. He became responsible for much of the final build-out of the trading system. We are both active in ongoing research, testing and portfolio construction. All the technology trends favour our kind of business. Te evolution of Cloud Computing, dark fibre, co-location, and the serious expansion of e-trading businesses at the banks all positively affect our performance and make us even more competitive. Furthermore, these major structural shifts in the way foreign exchange trading can be managed and operated mean we need little in the way of human resource. Essentially, all the heavy lifting has already been done over the last several years.
We are talking of course about automated trading. By design, automated trading systems require almost no human interaction as all electronic currency trades are STP’d (“Straight Trough Processed”) through to our prime broker.
Our excellent head of mid-office has simply to monitor our real-time operating and settlement systems rather than spending time in the reconciliation process. Many operating functions have effectively been outsourced to our partners. We have several IT, data storage, data processing and Cloud Computing solution providers. Our fund accounting is performed by Apex Fund Services, an independent fund administrator who produce our weekly NAVs. I perform the risk management function. Risk
186 | april 2012 e-FOREX
We are probably unconventional in the fact that we believe that markets are not efficient which happily defies the last fifty years of finance theory developed by Dr. Farma at the University of Chicago. We agree with Lord Keynes who wrote that markets are impacted by “animal spirits.” One can notice this almost everyday. Some days markets hugely overreact to an unexpected data release or news item – some days there is no reaction at all. Tese animal spirits can drive huge price changes, particularly in currencies. Perhaps the more common contemporary description for this crowd behaviour is “risk-on/risk-off.”
Please tell us a bit more about what you mean by these “animal spirits?”
A perfect example has been the recent history of the Australian dollar. In a 16-month period from 2008 to 2009 the Australian dollar/US dollar exchange rate fell 40% and then rose 56%. Was there a huge decline and then boom of the Australian GDP? No - Australian GDP actually grew mildly during this period with one only one quarter of small negative growth (4Q 2008, -0.9%). How does this wild exchange rate movement fit the description of an efficient market? Long ago we recognised that markets may align with fundamentals, but the reality is in the short and medium term prices can, and will, move all over the place. As a fund manager, had you been bullish (correctly) of the Australian dollar you would probably not have had any clients left had you held that long Australian dollar position; notwithstanding the fact that had you bought the high in 2008 you would have had an annualised return to date of about 7.5% (had you bought the low you would have had an annualised return of approximately 27.5%!).
Our investment philosophy has been centred on the creation of an investment process that seeks to create
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