Founded in 2002 by Kaveh Jahromi, Alteris Investment Managers specialises in hedge funds. The Sydney-based firm manages the Australian Absolute Return Fund and will soon launch the Asia Pacific Absolute Combined Fund. Alteris tells us more about the latter in this interview.
|Portfolio Risk Limits|
|Investment Universe||Exchange traded index futures|
|Number of Securities||5 - 15|
|Maximum Net Long||100%|
|Maximum Net Short||100%|
|Maximum Individual Position||20%|
|Profit Take||1% to 3%|
|Stop Loss||-5% to -10%|
|Derivatives Exchange||Traded Only|
|Cash/Fixed Interest||Investment Grade|
b. Dynamic risk management processes continually monitor the environment and adjust the portfolio so as to maximise returns and minimise risks. They focus on 'value at risk', net exposures, index cross correlations, index composition changes, futures fair value comparison as well as regulatory and legislative changes. The core of the dynamic risk management processes ensure that the following conditions do not persist for more than a trading day:
How do you define the approach of your fund?
The Alteris investment strategy is to:
- Create a fund which complements traditional asset classes;
- Invest in markets which show a low correlation with each other;
- Invest in a portfolio which is based upon a geographical concentration and provides investors with new opportunities;
- Invest in futures markets which are liquid and enable rapid entry and exits and changes of position;
- Invest in 5 - 15 global markets making it possible to spread risk and participate in profit opportunities available in different markets;
- Limit exposure to +/- 100%, allowing exposure at moderate risk;
- Use a combination of static and dynamic risk management systems which complement each other, managing exposures of internal portfolio construction and limits as well as monitoring the environment and adjusting for maximum returns and minimum risk;
- Use a directional strategy which profits from the movement of the markets;
- Use proprietary Multi Factor Models which are systematic and data driven and therefore consistent, reliable and accurate;
- Monitor the markets and indicate trends by using proprietary systems and processes;
Maintain deposits in cash earning competitive interest with low risk, at all times.
The strength of the investment strategy is in the way it systematically identifies and exploits pricing inefficiencies to generate superior returns and combines with the risk management strategy to do so at low levels of risk.
- What are the key characteristics of your strategy and how are you different from your 'peer group'?
We trade equity indices, as we see more alpha in trading indices, than that available in other markets such as bonds, currencies or commodities. We would rather limit our capacity to $1 billion and concentrate on creating alpha rather than diversify into other areas, which would expand capacity, but lower alpha and be more volatile.
How do you identify opportunities? And what strategies do you employ?
The core of our investment philosophy is our belief that financial markets have trends which tend to last a certain amount of time. Identifying the trend and the duration can lead to positive returns and capital growth. We implement this strategy by our approach which consists of a combination of trend analysis and risk management. The investment processes were developed from over 12 years of research and first-hand active portfolio management, and have undergone rigorous testing and demonstrate that market dynamics are not simply the product of random chance, and in fact, with the right approach and the correct tools, can be predicted to an extent which allows us to invest with confidence.
- What have your country and sector weighting been like?
We concentrate on Asia Pacific markets and trade equity indices.
- What's your performance been like?
The fund is new. We have done extensive back-testing on a daily basis over 17 years, which shows a return of 18.8% with a volatility of 7% or a gross Sharpe of 4.19 and a net Sharpe of 2.69. These figures are confirmed and subject to audit.
How liquid is your portfolio?
The portfolio is very liquid. It consists of cash and futures, which means liquidity is available (almost) 24 hours a day, all year round.
- What risk controls and measures do you have in place?
Alteris utilises two independent risk management systems - a static system and a dynamic system - and middle office processes which ensure the portfolio conforms at all times with the strategy and the risk management systems, through a feedback monitoring system.
a. Static risk management processes set limits and portfolio construction and takes into account portfolio exposure, trading instruments and profit take/cut loss measures
- VaR (daily) > 2%
- Long/Short > 80% or < -80%
Index correlations > +/-0.8
- What's your background and how are the responsibilities for running the fund divided between the team?
Alteris employs six professionals. Their roles are as follows:
Portfolio Risk Limits Principal & Chief Investment Officer Marketing/ Client Relations Manage Analyst/Trader/Research Administration /Operations Manager Support IT
- What other funds does Alteris run?
Alteris also manages the AIM - Australian Absolute Return fund, which is a long/short Australian equities fund with a systematic futures overlay.
Alteris Investment Management
61 2 9279 1103