CTA review: Salus Alpha
17/01/2012
Stockholm (HedgeFonder.nu) - We asked the players in the CTA / Managed futures world to give us their views on the 2011 in general terms for CTA / Managed Futures industry in general and their own trading strategies in particular. Editorial on HedgeFonder.nu formulated consciously call in rather vague and unspecific terms for providing such a diverse picture of the industry as possible. We also asked them to make an outlook for 2012 and the future of the CTA, which we realize is difficult for systematic traders. The contributions we receive will be published unedited and uncommented.
Markus Rudling, Managing Director – Salus Alpha Financial Services Nordic (Bild):
Goodbye 2011!
Most strategists and analysts were unanimous in early 2011 for that year looked promising and that the stock market, like 2010, would deliver solid gains and that we would get an increase of around 20%. 2011 was, however, in history as a very turbulent and eventful year. After a few stable months after the end of the world came to be dominated by the earthquake in Japan in March that made the markets react with volatility to soar. Fukushima was only related to late summer and autumn's big show where the global debt problem really got into everyone's focus. Greece was close to a complete collapse, several European countries were not far behind and the U.S. had its credit rating cut for the first time in history, although the problems even towering up in the Chinese sky. In addition, rising parts of the Arab world in a popular uprising against the outdated structures with a hard past and undemocratic leaders. In such a deep and widespread crisis came to the market's gaze is directed towards that part of the world where the situation was most acute - Europe! The euro and the EU was the first time since collaborated started in a significant political and financial crisis of confidence which Europe increasingly emerged as a house of cards at any moment might fall apart. The market is analyzed every word that was said or not said by European politicians and the major central banks. Every day the market was thrown between hope and despair with huge price swings in all asset classes as a result. The concept of volatility given a new meaning. In the autumn went equity, commodity markets and the euro in a major fall when institutional investors sold risk in favor of "safe haven" in the form of U.S. and German government securities and precious metals, gold in the lead, all of which showed record levels. Like the financial crisis of 2008 was sold government securities on several occasions to a negative rate. Investors borrowed hence the money for a guaranteed loss in exchange for getting rid of both counterparty risk strategy risk. A signal that is perhaps more clearly than anyone that the financial system is in substantial sway.
When summarizing 2011 based on the strategy Managed Futures, you should conclude that the systematic trend following managers generally had the tricky, with the fact that volatility was driven by the macro data and political maneuvering, generating large and erratic price movements down to a daily basis with no clear trends. Buy and sell signals that the models created were anything but reliable when fundamentals were missing altogether. The few trends that strategy succeeded in capturing found primarily in fixed income markets and to some extent even among precious metals even if the price of gold at the end of the year fell into the same track equity indices, currencies and other commodities with high volatility and one-strike prices. The insurance against the sharply falling share prices as the strategy showed up in the record year 2008 were conspicuous by their absence this year. But despite the lack of positive returns from Managed Futures as a whole it was nevertheless one of the strategies that performed best in a market that was anything but simple. Only pure arbitrage and market neutral strategies were able to manage the volatility of the market and ultimately generated the low returns for investors that otherwise saw their portfolios drop in value across the board.
Hello 2012!
Studies show that after each decline in Managed Futures given investors the opportunity to go into low and beneficial levels when downturns have historically been followed by a sharp rise and also the recovery period is relatively short compared to other strategies.
It was also the trustee RPM Risk and Portfolio Management mentioned earlier in this commentary series, ie., the Managed Futures historical are "mean reverting" about his own positive mean value with a distinct "Upward bias." An average of risk-adjusted is very advantageous compared to other asset classes and hedge fund strategies and also completely uncorrelated to equity and bond markets over time.
Another important point is that the Managed Futures strategy, which is virtually impossible to time. With this insight should be the strategy should always be considered in an overall portfolio. Managed Futures ability to take advantage of trends and cycles in all asset classes and sectors is unique and the strategy becomes increasingly important as the world becomes smaller by the day, financial markets are increasingly interconnected and assemblies in the equity markets, with a more frequent interval. The time when the shares over time was a superior location and the concept of diversification was to put in 10 to 15 shares and not in one or two shares are definitely over.
Our own CTA, Salus Alpha Directional Markets, went on the first negative year ever since its inception in March 2003. The Fund is based on a pure statistical model that predicts future price levels of close to 100 underlying futures contract. Thanks to the daily forecasts and their evaluation based on the direction and quality, the model is highly adaptive and can switch between different time horizons and strategies, that is, between short-and long-term and intermediate trend and "contrarian". Salus Alpha Directional Markets since its inception in March 2003 generated a total return of 346% with an annual average annual return of 17.3% at a volatility of 14% and a rolling beta and alpha on an annual basis to OMX Stockholm 30 at -0.08 and 16.52%.
The baseline risk of Salus Alpha Directional Markets can be found at Deutsche Bank's Managed Account Platform and thus can be accessed with full transparency and daily valuation by products such as Unfunded Total Return Swaps, Managed Accounts, UCITS III funds and structured products. The platform is called the risk "DMX - Directional Markets Index," which is a publicly listed investment index offense (a portfolio) with daily valuation that is actively managed by Salus Alpha Capital.
Despite the events in the market in 2011, analysis of historical data to Managed Futures continues to act as insurance against sharp fall in stock markets: after a decline of 3% or more of the Managed Futures is the average rise in strategy 7.7%. If equity markets continue to fall during the recovery period, we see that the average excess return in relation to shares in relation to amount to 15.8%.
What will happen in 2012, or the year ends, we can not predict. But it is clear that the problems that the world experienced in 2011 have not been resolved and that a potential solution will take time, resources and relationships of claim. The question most people ask is: Who will pay, what it will cost and what does the result look like? It is notable that Sweden perhaps for the first time in modern history is in a situation of economic and political stability that makes most of our European neighbors will be green with envy. In today's global world, with the financial markets are now fully interconnected, did it not, however, Swedish investors when they saw the Stockholm Stock Exchange (OMX Stockholm 30) in a year low of -26.7% as of September 23. October, however, offered a hefty recoil of almost 11.5% which was the Stockholm Stock Exchange to park at -16.1% at year end.
