with Martin Wiedmann, Founding Partner and
CEO of Quaesta Capital
Quaesta Capital has recently launched a fund
of funds investing solely in FX hedge funds
and CTAs. It currently has CHF85 million under
Martin, firstly, congratulations
on the launch of your new product. Could
you give us a brief introduction on your
firm and colleagues?
Quaesta Capital AG was founded in April
2005 and is based in Pfäffikon
SZ, near Zurich, in the neighbourhood
of major global alternative investments
providers such as MAN, RMF and LGT.
In total we have 8 staff, 5 of these
are based in Pfäffikon and 3 work
out of Germany, where we have a sister
company, Quaesta Capital GmbH, which
manages a BaFin regulated multi-strategy
fund of funds.
The partners of Quaesta Capital AG,
Christian von Strachwitz, Thomas Suter
and myself, all have extensive experience
in the financial markets, including
managing and controlling risk, asset
management, trading, structuring and
sales of foreign exchange products.
These activities were undertaken while
in managerial positions at major global
financial institutions, such as Citigroup,
UBS, Dresdner Bank and Commerzbank,
and in various locations, such as Luxembourg,
New York, Milan, London, Zurich and
Why have you created an FX focused
fund of funds?
Quaesta Capital's Foreign Exchange
Multi Manager Program (FX-MMP) is the
first programme which allows investments
into a highly diversified FX portfolio
for a large variety of investors.
FX is now broadly considered as a separate
asset class. However, in many portfolios,
pure FX investment products are still
missing. Most investors hesitate to
put their money into one single FX manager,
due to concentration of risk and lack
of transparency of these providers.
Hence Quaesta Capital believes there
is a natural demand for such an alpha
product. Our FX-MMP addresses these
key issues. Having been active in the
global FX markets for several decades,
we understand the particularities of
this industry and the underlying markets
in order to make sound investment decisions.
As per our research, currently there
is no FX only multi-manager programme
(fund of hedge funds) available. There
are several managed programmes, organised
by large financial institutions; these
however manage only proprietary banks'
capital, and are not open for investment
by the public.
How does your product further
diversify an alternative investment portfolio?
A typical alternative investment portfolio
is made up of mainly hedge funds and
private equity investments. The hedge
fund investments generally invest in
various sorts of strategies, mainly
in the field of equity and fixed income
securities. Today only a small portion
is invested in FX products, mostly as
part of a global macro programme, or
combined with investments into fixed
FX strategies are viewed as highly
volatile. What are the risk and returns
associated with this asset class?
FX as an asset class being particularly
volatile is a wrong perception. FX volatilities
have been well below those of other
asset classes such as equity and fixed
income. However, the expected risk and
returns of FX depend greatly on the
leverage used by the currency manager.
I understand that your investment
methodology involves a proprietary technology
called dipCast. Can you give us an overview?
The model's approach is based on computational
intelligence; it has been researched
and built by Dortmund Intelligence Project
(DIP), a cooperation between the University
of Dortmund and Quaesta Capital. In
2002 Dortmund Intelligence has won the
technology endeavour award of the state
of North-Rhine Westphalia.
The model is used for portfolio construction.
It computes the optimal mix and weightings
of the FX programmes in our proprietary
Quaesta Capital FundRiskBase, which
currently consists of around 200 FX-only
hedge funds and CTAs. The model takes
into consideration risk parameters such
as risk, return, skewness, kurtosis,
VaR and others.
How do you identify potential
As part of our research process, we
have built Quaesta Capital's FundRiskBase.
Through our strong international network
in the FX world and other sources we
have identified, contacted and built
up a relationship with currently around
200 managers. On an ongoing basis we
monitor the performance and development
of these programmes.
What do you look for when evaluating
Initially we are happy to include every
manager on our radar-screen as part
of our FundRiskBase. We have set several
investment constraints such as minimum
assets under management, live track
record and performance figures. Of course
every investment must fit into the overall
portfolio allocation, using dipCast.
How many funds are you currently
The FX-MMP portfolio currently consists
of 13 managers, diversified by style,
region and underlying instruments traded.
Can you give us a workflow on
how investment decisions are made internally?
Initially the dipCast model selects,
via various portfolio simulations, a
shortlist of potential FX programmes
for investment. This managers form the
basis for our initial due diligence
process, which includes a specific FX-related
due diligence questionnaire prepared
by Quaesta Capital, plus conference
calls. The final core group of FX managers
is visited by at least two of our partners
for onsite due diligence checks.
As part of this process, ongoing portfolio
simulations are made with the remaining
candidates on the shortlist.
What is your portfolio turnover
We view ourselves as long-term investors;
however, due to the nature of such a
programme, we may reallocate managers
partially on a monthly basis.
Which type of investor or portfolio
type would benefit from investing in your
The Quaesta Capital FX-MMP is suitable
for a wide range of investors. Anyone
looking for further diversification,
hence an uncorrelated product to the
traditional asset classes, should consider
FX as an interesting addition and alternative
to its current portfolio composition.
This can be institutional investors
such as family offices, pension funds,
insurances, treasury departments of
banks and corporate, as well as private
clients. Treasury departments, for instance,
may outsource parts of their risk capital
to our FX-MMP.
Lastly, do you have any marketing
trips planned for 2006?
Yes, we are currently organising a
road show in spring 2006. We will also
actively participate in several hedge