Industry Updates

IMQ seeds Romanesco's Persistence Program

Monday, March 11, 2013

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Opalesque Industry Update - With investors looking for strategies with low equity correlation and high liquidity, coupled with exposure to both currency and commodity markets, early-stage seeding specialist IMQ has seeded a new systematic trading strategy, the Persistence Program, from Romanesco Capital Management.

The Romanesco strategy will be available via the Deutsche Bank dbSelect managed investment platform, which has been subject to an ISAE 3402 assurance audit. The high-quality institutional controls and other efficiencies offered by dbSelect can assist in reducing operational risk and help to enhance the attractiveness of new managers to all investors.

Romanesco’s portfolio is broadly diversified across 45 liquid futures markets comprising currencies, bonds, equity indices, and commodities that are implemented across the different geographical regions on a 24-hour basis with the help of a proprietary developed automated execution algorithm. The algorithmic models look for break-outs from trading ranges, and aim to reduce exposure after spikes in volatility.

The trading models can be long, short or flat in each market. As such, Romanesco is more selective than most CTAs in deciding when to be exposed to particular markets.

IMQ’s CEO and Founder, Jeroen Tielman, comments: “The strategy fits into our portfolio as it is not correlated with equity and adds diversification versus existing IMQ managers. This is the first seed deal where we will apply high definition open line technology to implement a "virtual co-location," so that the team can stay where they are. This will not conflict with our basic principle of close guiding and monitoring."

Correlation patterns against key benchmarks suggest strong diversification benefits, as Romanesco exhibits a negative correlation against both equities and hedge funds, and a slight positive correlation against bonds and managed futures. Romanesco produced one of its best years on record in 2012 and has averaged more than 14% per annum since 2005 with a standard deviation around 13%. The benefits of Romanesco’s short term asymmetrical strategies are shown by its strong alpha, positive up-capture and negative down-capture against The Newedge Trend.

Of the wider market, Tielman added: “Emerging hedge fund managers deserve to form a core element of any alpha generation strategy. Time and time again, academic studies confirm the outperformance of newer and smaller hedge funds as the entrepreneurial spirit shines through bull and bear markets. The long-only bias of most institutional investors is ill-equipped to meet their growing liabilities. Only absolute returns, ahead of zero, can hope to meet these liabilities, which have no real link to conventional asset classes. Against this challenging landscape, skill based, absolute return investing is a pre-requisite.”

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