statistical arbitrage how to diversify to generate alpha arbitrage how to diversify to generate...
TRANSCRIPT
Statistical Arbitrage How to diversify to generate Alpha
Table of Contents
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Page I. Executive summary 3 II. Investment Strategies 4 III. Advantages of our system 5 IV. Performance 2013 6 V. Performance since inception 7 VI. How our trading system works 8 VII. BNP: Beta Neutral Portfolio 10 VIII. GYC: Introducing Global Yield Curves 11 IX. GYC: Yield Curve Strategies 12 X. GYC: Pairs trading long term rates 13 XI. GYC: Risk Management 14 XII. GYC: Performance 15 XIII. Why diversification? 16 XIV. Alpha generator 17 XV. Portfolio Revisions 18 XVI. Questions and answers 19 XVII. Investor Contacts 20 XVIII.Disclaimer 21
Executive Summary
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Investment Strategies
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It has been proven that long only and static asset allocation methodologies are incapable of enduring the peak-to-through decline of the markets.
Advantages of our system
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Performance - 2013
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-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0% S & P 500 T otal R eturn Hang S eng T R Z J P M As ian B ond Index
Key statistics Return (Jan’ 13 – Apr’13) 18.28% Return (Annualised) 55.91% Std Dev (Annualised) 17.01% Sharpe Ratio 3.29 Sortino Ratio 8.39 Alpha (Annualised) 57.27% Beta (vs S&P500) -4.49% Max Drawdown -1.71% VaR (Montecarlo @ 99.9%) -5.50% Correlations TRZ vs S&P500 -10.60% TRZ vs Hang Seng 7.60% TRZ vs JPM Asian Bond Index -2.95%
Performance – Since inception
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-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0% S & P 500 T otal R eturn Hang S eng T R Z J P M As ian B ond Index
Key statistics Return (Inception – Apr’13) 35.13% Return (Annualised) 52.13% Std Dev (Annualised) 15.67% Sharpe Ratio 3.33 Sortino Ratio 4.52 Alpha (Annualised) 54.36% Beta (vs S&P500) -10.06% Max Drawdown -2.54% VaR (Montecarlo @ 99.9%) -6.40% Correlations TRZ vs S&P500 -19.76% TRZ vs Hang Seng -0.19% TRZ vs JPM Asian Bond Index -11.11%
How our trading system works
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How our trading system works
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BNP: Beta Neutral Portfolio
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The BNP strategy assumptions are fairly easy to assess. From a mathematical point of view we apply part of the propositions theorized by Frazzini and Pedersen in their last paper. The remaining part is a proprietary model.
GYC: Introducing Global Yield Curves
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Parallel shift
Source: Diarch Research
Flattening Convexity Increase
Source: Diarch Research Source: Diarch Research
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2Y 5Y 10Y 30YMaturity
Yield
To
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rity
TT+1
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0.5%
1.0%
1.5%
2.0%
2.5%
2Y 5Y 10Y 30YMaturity
Yield
To
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rity
T+1T
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2Y 5Y 10Y 30YMaturity
Yield
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rity
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T
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GYC: Yield Curve strategies
GYC captures most yield curve movements Parallel shifts, steepening/flattening, butterfly trades Returns on same assets but low correlation Positive carry and duration neutrality Directional in the level, slope and convexity
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GYC: Pairs Trading long term rates
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GYC: Risk Management
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Performance
Since we started diversifying among strategies our trading system has consistently produced average returns around with very low draw downs. To achieve these returns we use a leverage of around 5 times the AUM which guarantees a very good trade-off between risk and returns. If the investor can afford a higher risk appetite this can be increased.
Why diversification?
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Alpha Generator
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83% Positive Alpha 17% Negative Alpha
-0.600%
-0.400%
-0.200%
0.000%
0.200%
0.400%
0.600%
0.800%
1.000%
1.200%
0 50 100 150 200
Portfolio Revisions
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Questions & Answers
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Contacts
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Jos Van Trier Partner and founder +31 (0) 888 723 900 [email protected] Giancarlo Cobino Fund Manager + 31 (0) 208 083 863 [email protected] [email protected]
www.trzfunds.com
Disclaimer
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