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ESG in portfolios and the firm
Aspect is proactively engaging with investors on ESG perspectives and requirements. Lueck finds that the arguments can be far more nuanced for a dynamic futures trading strategy than they would be for a long only equity or corporate bond strategy: “Should we be short but not long of energy? Should we invest in equity indices excluding ESG stocks? Should we avoid currencies of countries with larger carbon footprints?”. No clear consensus has emerged on how to answer these questions.
At the firm level, Aspect became a certified ‘B’ Corporation in June 2022, based on a B-Lab assessment of its responses to 220 questions covering governance, workers, community, environment and customers. In the simplest terms a B Corp prioritises people and planet as well as profit. “We saw it as consistent and resonant with the founding ethos, principles and values of Aspect when we set up the company. The values and culture of the company include teamwork, integrity, working in partnership, mutual respect, and giving back to the community. 25 years ago we set up a charity committee to put something back. We are maximizing stakeholder value, not only shareholder value,” says Todd.
The corporate culture has helped to encourage longevity of tenure amongst staff: six have worked at Aspect for over 20 years and 20 for over 15 years. Travel sabbaticals are one example of a distinctive policy designed to broaden employee horizons rather than maximise profit. “After five years everyone gets a four-week paid sabbatical to carry out life changing travel, and staff submit their plans for this to the board. Some have been to
Bhutan, Japan, New Zealand, travelled the Silk Road, visited Latin America, or even Antarctica,” says Todd.
Diverse thinking, DEI and apprenticeships The three founders all studied physics, as did some subsequent hires, though Aspect has recruited from a wide range of disciplines and academic backgrounds, including astrophysics, electrical engineering, data science, statistics, computational finance and mathematics. “We welcome a wide dispersion and variety of views. We do not want group think, but the common quality of our hires is intellectual curiosity, inquisitive minds and a scientific bent to question how something works and if it can be done better,” says Lueck.
Beyond intellectual diversity, Aspect’s DEI (diversity, equity and inclusion) breakdown of its staff is impressive. “This reflects a conscious effort. We go to additional lengths to broaden the pool of candidates as widely as possible, through initiatives such as 10,000 Black Interns and apprenticeship schemes, to draw the net wider. This simply broadens the recruitment opportunity set rather than applying an explicit bias to diverse candidates,” says Todd.
Apprenticeships can provide financial support for university students as well as career paths prior to, or without, attending university. There are about 6 apprentices working in the firm currently, and Aspect just hired two of them. There are 4 apprentices working in the firm currently, and 2 others recently transitioned into permanent roles.
made intuitive sense and the past two years has demonstrated the benefits of being exposed to powerful and persistent trends in Eastern European interest rates, multiple energy markets across various regions and countries, and carbon emissions.
Aspect invests in developing trade execution prowess to drive down market impact and open up more degrees of freedom – in terms of both adding some shorter-term signals and expanding overall program capacity.
Defining appropriate capacity ceilings Aspect Capital’s peak assets were $10.9 billion in July 2022. “Capacity for Aspect Diversified and Aspect Core taken together is estimated at around $15 billion. Diversified alone has less capacity as the relative value modulating strategies are less scalable,” says Todd.
The other strategies have largely independent capacity, which would probably take overall firm capacity to $20 billion, but asset raising is not a target. Rather it is viewed as a headwind potentially diluting the goal of consistent performance, which needs to be regularly recalibrated to prevailing constraints.
“Of course, capacity could always be increased by slowing down models or increasing allocations to more liquid markets, but such changes would impair style consistency,” says Lueck. Some CTAs, including some large funds, have increased fixed income and reduced commodities, but Aspect is very keen to retain the diversification benefits of some less well trodden markets.
Dispersion in CTA returns Optimal capacity and the choice and weights of markets explain some dispersion in CTA returns but in other cases there are more a priori reasons. Aspect highlights three key differentiators that illustrate how carefully they have developed their trend models over the years: directional bias, time frames, and avoiding over-fitting.
“Some CTAs have a long bias to risk premia, such as equity risk premia, which may make sense over a 20-year time horizon. However over shorter periods any long bias to any asset class – whether it is equities, bonds or commodities – can make it more difficult to generate diversifying returns in years such as 2022,” says Lueck. Philosophically, Aspect is agnostic to market direction and wants trend models to do equally well in rising or falling markets. In fact, Aspect has also introduced
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