TRADERTALK
Do you think the currency fund management business is getting harder in terms of delivering consistent returns?
We think it may be getting easier. Some of the more difficult years were 2005 and 2006 when low volatility created few opportunities for currency managers. Many managers produced low single digit returns when equity and credit markets were booming. Tus a diversified portfolio including all asset classes should perform well. In periods of high volatility, short-term currency trading returns should perform extremely well – when other asset classes are under stress.
When equity markets became more difficult the diversification benefits of investing in currencies also became apparent.
One reason that we think that the FX market is getting easier is that lower trading costs are enhancing our returns. In addition, the fact that S&P 500 is 12% below its price 12 years ago has helped devalue this cult of equity that indoctrinated investors in the 1980s and 1990s. Tis has forced investors to focus on attractive returns available in other asset classes. Very, very few investors have bothered to allocate to currencies as a stand alone asset class. Consultants don’t now how to benchmark it, investors don’t know how to classify it, and only now are they
are some institutional investors beginning to recognise that currency trading can be an attractive risk diversifier for their portfolios.
Due to its liquidity, simplicity and transparency and it has to be said, due in no small part to the explosion in the popularity of retail forex as a global phenomenon, the next big growth area will be the recognition of FX as a major asset class. It is long overdue and the possibilities are vast.
Looking ahead, how will you be addressing the main challenges facing Eleuthera Capital as you seek new ways for capturing and exploiting investment opportunities with currencies?
One point that is often overlooked by investors is that the currency market is perhaps the only market in the world that participants do not all share a similar profit maximising objective. A large portion of the currency market is comprised of corporate treasury managers whose sole objective is to transfer cash balances between various markets where they have to pay invoices or receive payment for goods and services. Sometimes they need to hedge out future exchange rate risk. Tey all share a common trait – they must execute a transaction that in itself is not profit seeking. Tis throws out many possibilities of alpha generation for us – these transactions often create short-term market distortions that we are able to exploit. In essence we can create profits by bringing the market back into equilibrium helping accommodate the daily trade flows of commercial transactions.
Our future management efforts are concentrated on two areas – striving to make our investment processes, risk management and trading models the absolute best that they can be and continuously researching new trading ideas. Te dinner table conversation of our investment team usually involves discussing new or possibly better way of currency investing. Our focus is on shorter-term time horizons for a number of reasons.
Te objective is to be like a tollbooth
on a highway. We want many trades going through generating modest, sustainable profits every day. In the shorter time frames the inevitable drawdowns can be absorbed and regained swiftly. We think that in this way we can monetise the market “noise” and create a higher quality and lower risk investment return for our investors in almost all market conditions.
We believe that by deploying decades of trading experience into a systematised investment process, and by continuing to implement new and evolving models, we can generate very attractive risk adjusted returns for years to come.
192 | april 2012 e-FOREX
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166 |
Page 167 |
Page 168 |
Page 169 |
Page 170 |
Page 171 |
Page 172 |
Page 173 |
Page 174 |
Page 175 |
Page 176 |
Page 177 |
Page 178 |
Page 179 |
Page 180 |
Page 181 |
Page 182 |
Page 183 |
Page 184 |
Page 185 |
Page 186 |
Page 187 |
Page 188 |
Page 189 |
Page 190 |
Page 191 |
Page 192 |
Page 193 |
Page 194 |
Page 195 |
Page 196