Strategy is a generalist, trading oriented approach focusing on liquid equities and futures. Trading is short to medium-term, emphasis on technology, consumer, and energy sectors. Typical trades include market directional, fundamental catalysts, news/events, sector rotation, index rebalancing, or other temporary dislocation. The strategy tends to be most profitable during periods of extreme volatility and market instability and acts as a natural hedge for the fundamental L/S portfolios which generally have difficulty during those periods. Team leverages the research capabilities of the L/S and Marco teams to increase their edge in the market.
Sector: Global Macro
The strategy is made up of a diversified portfolio of liquid products primarily in the major FI & FX markets, medium to long-term directional in nature with a strong bias to avoiding negative skew in addition to finding attractive risk/reward opportunities. The positions will commonly have a strong fundamental reasoning based upon economic and political analysis leading to a thematic approach to trade implementation. Trading has a strong focus on Central Bank policy and on cyclical vs. secular economic trends.
In addition to traditional risk management techniques the strategy diversifies stylistically as they believe that certain trading styles will not be equally profitable all the time. For example the portfolio would include fundamental value, contrarian, momentum/trend following and short-term vs long-term views. Styles that are minimized include selling gamma and selling liquidity.
In their analysis of market fundamentals the team looks for markets where there is the possibility of a paradigm shift. This is when the basic assessment of the outlook completely changes and the market slowly recognizes that there is another economic equilibrium which is very far from the current. These shifts will commonly allow great risk/reward entry levels and the potential to grow into major long-term trends.
The strategy utilizes in-depth knowledge of the healthcare industry to place well researched longer-term core holdings while trading around positions to enhance returns. The strategy also utilizes a derivatives overlay to manage risk and exposure and to fine tune the risk-reward profile.
Emphasis is placed on information flow from the team's industry knowledge, a deep network of Wall Street contacts, proprietary network of scientists and clinicians, databases and quantification tools. The team generates ideas using academic and scientific insights as well as quantitative exploration of qualitative ideas. Risk is managed through the use of quantitative metrics and scenario analysis, dynamic sector rebalancing, soft stops trigger immediate reviews of investment thesis and continuous portfolio reviews.
The strategy is bottom-up creating a fundamental edge through detailed models and fundamental research on over 150 companies, extensive communication with industry experts, on-site visits, and through an understanding of valuation distinctions. The book's objective is lower volatility, consistent alpha generation and high risk adjusted returns.
The strategy combines the team's research and trading expertise with an in-depth understanding of cyclical and industrial companies. Longer term core positions are held with companies that the team has researched extensively and have the highest conviction. The team will trade around core positions with limited use of derivatives to extract additional alpha. AUM reflects strategy assets.