The Cambridge Strategy Foreign Exchange Overlay - PowerPoint PPT Presentation

1 / 31
About This Presentation
Title:

The Cambridge Strategy Foreign Exchange Overlay

Description:

Russell began his career at Midland Montagu in 1989 as a business analyst, and ... Following the merger with Midland bank he was promoted to a senior sales role, ... – PowerPoint PPT presentation

Number of Views:306
Avg rating:3.0/5.0
Slides: 32
Provided by: nicolek150
Category:

less

Transcript and Presenter's Notes

Title: The Cambridge Strategy Foreign Exchange Overlay


1
The Cambridge StrategyForeign Exchange Overlay

2
  • A Systematic FX Trading System

3
Risk Disclaimer Some services are not available
to private inexperienced investors. Services may
also not be available to certain investors due to
regulatory or other constraints either in the UK
or elsewhere. The information contained herein is
not targeted at the residents of any particular
country and is not intended for distribution to,
or use by, any person in any country or
jurisdiction where such distribution or use would
be contrary to local law or regulatory
requirements. Information contained herein may be
subject to change without notice. Investments in
securities of financial instruments (which
include contracts for differences, futures,
options spot and forward foreign exchange and
off-exchange contracts) can fluctuate in value
and you should be aware that you may not realise
the initial amount invested and may incur
additional liabilities. As investments in
securities or financial instruments may entail
above average risks you should carefully consider
whether your financial circumstances permit you
to invest and if necessary seek the advice of an
independent financial adviser. Foreign exchange
denominated securities and financial instruments
are subject to fluctuations in exchange rates
that may have a positive or negative effect on
there value, price or income derived from the
securities or financial instrument concerned.
Past performance should not be taken as a guide
to future performance. You are advised that
Arcanum Investment Management is unable to
provide advice as to tax consequences of a
particular investment or investment strategy and
you are advised to seek professional advice in
this respect. Arcanum Investment Management LTD
is authorised and regulated by the Financial
Services Authority. This document is not a
solicitation or instruction to invest. It is
provided for information purposes only.
4
  • A systematic approach to exploit opportunities in
    the currency market using a diversified mix of
    currencies and trading time horizons that
    encapsulates the extensive experience of the
    team.
  • The system exploits a statistical edge that is
    then expressed in the portfolio after being
    adjusted for risk.
  • The leverage in the portfolio is optimised by
    using a proprietary risk and money management
    system.

5
CONTENTS Company Objectives Investment
Process Risk Management Implementation
6
COMPANY
7
The Cambridge Strategy Trading Team Pete
Henricks Principal Former CEO,
Alliance Capital LLP, Asia Russell
Thompson Principal Former Head of
Trading for AIG Trading, Asia Andrew
Bent Principal Former Head of
Asian Currency Trading , HSBC, Hong Kong
Company Objectives
Investment Risk
Implementation Appendices

Process Management
8
  • Authorised and Regulated by the Financial
    Services Authority
  • 107,000,000 of Assets under Management in our FX
    Alpha Programme
  • 20,000,000 of Assets under Management in an FX
    Currency Overlay Programme
  • 250,000,000 of Assets under Management Under
    Advice of FX Currency Overlay Programme

Company Objectives
Investment Risk
Implementation Appendices

Process Management
9
OBJECTIVES
10
Risk Mitigation Naked Currency Exposure Can Add
Significant Volatility to Underlying Currency
Returns
Company Objectives
Investment Risk
Implementation Appendices

Process Management
11
Currency Risk represents around 14 of
International Equities Risk and 64 of
International Bonds Risk
Company Objectives
Investment Risk
Implementation Appendices

Process Management
12
  • Excess Returns
  • Despite liquidity, the currency markets have
    inherent inefficiencies that can be modelled and
    exploited for Currency Alpha.

Company Objectives
Investment Risk
Implementation Appendices

Process Management
13
The alternatives
Company Objectives
Investment Risk
Implementation Appendices

Process Management
14
Active Currency Overlay
  • Specialist focus on existing currency risk
    embedded in an international portfolio of
    equities or bonds
  • An active currency overlay programme can seek to
    reduce risk and/or add returns within client
    defined objectives and constraints
  • Hammond Black offers a fully customisable
    currency overlay programme that uses systematic
    indicators to create excess alpha

Company Objectives
Investment Risk
Implementation Appendices

Process Management
15
Realities and Perceptions of Risk The Cambridge
Strategy Annualised Risk has not Exceeded
Traditional Asset Classes
Company Objectives
Investment Risk
Implementation Appendices

Process Management
16
INVESTMENT PROCESS
17
  • A proprietary algorithm is used to identify
    opportunities in the major currencies.
  • Systematic monitoring of currencies over three
    distinct strategies, and multiple time frames.
    This process identifies trades in trending and
    congested markets
  • Trades are executed by a member of the Core Team
  • Finite risk exposures through a strict control
    mechanism that is in place at all times

Company Objectives
Investment Risk
Implementation Appendices

Process Management
18
Company Objectives
Investment Risk
Implementation Appendices

Process Management
19
  • Leverage is strictly controlled by managing risk
    at the Trade Level.
  • Each trade assumes identical risk
    characteristics. Ruin Strategy is employed to
    focus on maximizing gains, and limiting losses,
    and link portfolio level risk to trade level
    risk.

Company Objectives
Investment Risk
Performance Appendices

Process Management
20
RISK MANAGEMENT
21
  • Take profit and stop loss levels are set before
    trade execution
  • Stop loss levels are immutable and a determinate
    of position size
  • Each trade endeavours to have the same risk
    characteristics
  • VAR is monitored in real-time at both individual
    trade and portfolio level
  • Value at Risk
  • Trade Level
  • VAR allocated to each trade is identical
  • VAR is reviewed weekly

Company Objectives
Investment Risk
Implementation Appendices

Process Management
22
  • Portfolio Level
  • An overall Adjusted VAR limit of 2 of capital
    based on a two standard deviation move in the
    underlying
  • VAR calculated in three ways
  • Simple
  • Portfolio
  • Adjusted
  • Cambridge employs worst case scenario methodology
  • FENICS system used for risk management
    calculations
  • Leverage is calculated on a weekly basis and is
    based on a self correcting mechanism that relies
    on the historical risk adjusted performance of
    the model
  • Ruin Theory is employed to generate probability
    using Monte Carlo simulations that dictate the
    risk inherent in each trade and therefore
    position size

Company Objectives
Investment Risk
Implementation Appendices

Process Management
23
Company Objectives
Investment Risk
Implementation Appendices

Process Management
24
IMPLEMENTATION
25
Company Objectives
Investment Risk
Implementation Appendices

Process Management
26
  • Report from Client/custodian to Hammond Black
  • Consolidated country allocation report to Hammond
    Black on a monthly basis (or as required)
  • Net currency exposure decision
  • Hammond Black decides what is the appropriate net
    currency exposure for the portfolio within client
    guidelines
  • Hammond Black implements the strategy using
    currency forwards and / or options with its
    interbank counterparts
  • Reports from Hammond Black
  • Custodian gets all trades executes by Hammond
    Black
  • Client gets activity and performance report on a
    monthly basis
  • Overlay clients have access to net exposure via
    our website

Company Objectives
Investment Risk
Implementation Appendices

Process Management
27
  • Client signs investment management agreement with
    Hammond Black
  • Client signs clearing/collateral agreement
  • Client segregates or provides a line of credit or
    securities for overlay
  • Clearer sets up FX lines with Hammond Blacks
    trading partners

Company Objectives
Investment Risk
Implementation Appendices

Process Management
28
Hammond Blacks Trading Partners Union Bank of
Switzerland HSBC Deutsche Bank Royal Bank
Scotland Royal Bank Canada AIGFP Saxo Bank
Company Objectives
Investment Risk
Implementation Appendices

Process Management
29
Appendices
30
  • PETER HENRICKS
  • Peter holds a BA from Flinders University of
    South Australia and a Masters of Project
    Management from the University of Technology,
    Australia and is a doctoral candidate at the ISM
    in Paris. He began his career at Shearson Lehman
    where he was responsible for trading short dated
    treasury instruments and rose to senior dealer in
    Hong Kong. He was subsequently promoted to
    merchant banking head in Australia with
    responsibility for treasury, stock broking,
    foreign exchange and fixed income.
  • In 1993 Peter joined Alliance Capital as CEO of
    various subsidiaries throughout Asia. In this
    position he was responsible for leading the teams
    that managed Far East equity portfolios. He
    oversaw research, office administration,
    compliance, institutional marketing and retail
    sales. During this period, Peter founded offices
    for Alliance in Australia, Hong Kong, Taiwan and
    negotiated the J.V. in China with Ping-An.
  • Under his leadership the Australian offices
    became fully integrated fixed income and equities
    management operations that grew to 100 employees,
    with over USD 28 billion in assets.
  • In addition Hong Kongs retail and institutional
    assets grew to exceed USD 5.5 billion and the
    Taiwan office became one of the leading retail
    fund distributors within Alliance and in Taiwan.
  • Prior to the establishment of Cambridge Strategy,
    Peter founded RPMH and AJIA-RPMH Inc which
    manages global and Asian equities. Peter works
    with the Bank of International Settlements on
    financial stability in developing markets.
  • RUSSELL THOMPSON
  • Russell has a BSc(Hons) in Economics, and is a
    member of the Association of Corporate
    Treasurers, having passed his ACT exams with
    distinction. Russell began his career at Midland
    Montagu in 1989 as a business analyst, and
    quickly moved to being a Derivatives and Money
    Market Trader assuming responsibility for trading
    and hedging the Medium Term Sterling Mortgage
    Swap Book, and the Latin American Brady Bond
    Portfolio.
  • In 1995 Russell joined HSBC Markets in Hong Kong
    as a Forward/Proprietary trader, Trading the DEM,
    CHF, AUD and ZAR books, and running the short
    dated HKD Arbitrage book and a proprietary
    trading book. He progressed to Senior Derivatives
    Trader, successfully creating and running the Non
    Deliverable Forwards desk through the turbulent
    Asian Crisis, and producing record profits for
    the Bank.
  • In 1998 Russell joined AIG Trading as a senior
    Trader, and was quickly promoted to Head of
    Trading for Asia. This included responsibility
    for all aspects of Currency and Interest Rate
    Trading in AIG Inc. HK, including Trading, Risk
    Management, Personnel, and Compliance. AIG
    Trading Inc HK was a 1st Tier Market Maker in
    Asia, and was focused primarily on Asian Emerging
    markets business. Russell was also responsible
    for trading and managing the successful AIG
    Proprietary Asian Currency Fund.
  • In 2001 Russell resigned from AIG and moved to
    North America and co-founded two Companies,
    Platinum Destinations, a successful luxury
    lodging company based in Whistler, BC and the
    Perennia Fund, a closed-end Cayman Islands based
    private offshore Fund specialising in real estate
    investments. The Perennia Fund currently has 18
    Mio Usd of Assets under Management and after fees
    has returned 19.1 per annum to investors since
    2001. The Fund is currently closed to new
    investors.
  • In 2003 Russell joined RPMH LLP. as a consultant
    to develop a Foreign Exchange platform which
    began trading in 2004. Russell manages the North
    American and Asian Time zones providing 24-hour
    global coverage to the Cambridge Strategy.
  • ANDREW BENT
  • Andrew graduated from Manchester University with
    a BA(Ord) with credit in History. He began
    working for Hong Kong and Shanghai bank in
    Manchester as a Junior Dealer on the foreign
    exchange sales desk. Following the merger with
    Midland bank he was promoted to a senior sales
    role, responsible for the execution of foreign
    exchange, money market and derivative
    transactions with the offices key corporate
    accounts.
  • In 1994 he joined HSBC Markets in Hong Kong as a
    trader on the currency management desk,
    responsible for running books in all of the spot
    and forward Asian currency pairs. He was promoted
    to the position of Senior Trader in 1997,
    assuming the additional responsibility of market
    making the short-dated NDF books following the
    creation of the desk .
  • In 1998 Andrew was appointed Head of NDF Trading,
    responsible for managing all aspects of the
    enlarged business, and was involved in both
    regional and global steering committees aimed at
    standardizing market practice.
  • In 2000 he was made Head of Asian Currency
    Trading, with a mandate to develop and manage the
    strategy for both deliverable and non-deliverable
    trading in the centre. During this time the
    business attained a consistently high ranking in
    a number of industry surveys e.g. Best Bank
    Emerging Asian Currencies 2002 (FX Week).
  • Andrew resigned from HSBC in 2003 in order to
    return to the UK with his family. He spent the
    following two years investing in, renovating and
    managing property in North Yorkshire, as well as
    being heavily involved in local charity work. He
    recently made the decision to return to the
    financial markets and manages the European time
    zone for the Cambridge Strategy.

Company Objectives
Investment Risk
Performance Appendices

Process Management
31
  • Contact Details
  • Peter Henricks Andrew Bent
  • pete_at_thecambridgestrategy.com andrew_at_thecambridg
    estrategy.com
  • pete_at_arcanum.co.uk
  • 44 (0) 207 7870 5720 (London Office) 44 (0)
    207 616 4743 (London Office)
  • 44 (0) 776 980 6128 (UK Mobile) 44 (0) 774
    261 0663 (UK Mobile)
  • petehenricks Skype andrewbent1 Skype
  • 44 (0) 207 616 4708 Fax 44 (0) 207 616
    4708 Fax
  • Russell Thompson
  • russell_at_thecambridgestrategy.com
  • russell_at_arcanum.co.uk
  • 1 778 328 7651 (Vancouver Office)
  • 1 203 987 5453 (North America Direct)
  • 1 604 808 6417 (World Mobile)

Company Objectives
Investment Risk
Performance Appendices

Process Management
Write a Comment
User Comments (0)
About PowerShow.com