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.
What's your background and how are the responsibilities
for running the fund divided between the team?
How do you define the approach of your fund?
The Alteris investment strategy is to:
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
- What have your country and sector weighting been like?
We concentrate on Asia Pacific markets and trade equity
- 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
|Portfolio Risk Limits
||Exchange traded index futures
|Number of Securities
||5 - 15
|Maximum Net Long
|Maximum Net Short
|Maximum Individual Position
||1% to 3%
||-5% to -10%
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:
Alteris employs six professionals. Their roles are as
|Portfolio Risk Limits
|Principal & Chief Investment Officer
||Kaveh Jahromi (KJ)
|Marketing/ Client Relations Manage
|| Káti Gapaillard (KG)
|| Hugh McGuire (HM)
|Administration /Operations Manager
||Paula Lowndes (PL)
||Kerry Haywood (KH)
||Alan Lee (AL)
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