Tue, Sep 23, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque UCITS intelligence

Feedback From Managers - Interview with Emmanuel Terraz, Fund manager of the Dexia Index Arbitrage Fund,celebrating 10 years management of the strategy.

Tuesday, November 05, 2013

Emmanuel Terraz

In September 2003 and after 6 years in Proprietary trading, Emmanuel Terraz feels ready to launch a strategy capitalising on the steady growth of the Index markets since the eighties. The fund is Market Neutral, each position is hedged via Futures, ETFs or a basket of equities with daily liquidity and aims to provide Money Market plus type of returns. Dexia Index Arbitrage Fund is a UCITs since inception, registered in France, where Dexia Asset Management is based.

Emmanuel, could you explain us how you generate returns?

The fund takes advantages of statistical arbitrage strategies on equities based on a rigorous analysis of the stocks rebalancing in the indices. The rebalancing can happen periodically every quarter, half year or year or due to specific events such as spin-offs, mergers, credit rating changes. The particularity is our discretionary approach using quantitative analysis refined by qualitative analysis.

The quantitative side allows us to screen the markets and evaluate price opportunities very efficiently ; the qualitative aspect gives us the skill to manage the timing of investments and understand intrinsic risks of each position.

Has this mix of quantitative and qualitative been a plus for the strategy in the last 10 years?

I believe that managing our strategy can be assimilated to flying a plane ! Today planes fly mostly on auto pilot because the complex and as well simple flying rules have been encoded. The complexity comes under stress situations where a human skill is needed to appreciate the risks and find concrete unknown solutions...Landing under adverse conditions requires a human intervention and can be very successful despite the high level of risk to fail! Our 10 years experience dealing under different market cycles has given us the opportunity to test the efficiency of such mix of decisions.

Can you give us a concrete example ?

In general, 2008 crisis was for all of us an opportunity to experience un-predictable market reactions and un-predictable market volatility. Systemic risks show us that what we called « unlikely» can happen ! 2008 forced us to re-define the size of the positions for example in order to continue to have market exposure but not fully invested to avoid being over exposed in an irrational market.

The Volkwagen short squeeze in 2008, making it worth more than any other company in the world, is a good example that a Fund Manager must be ready for the unbelievable.

What did you learn in these past 10 years that will be useful for the coming ones ?

We have experienced positive and adverse markets; we have experienced large fund withdrawn, moving in 2008, from 1,4 billions to 600 millions under management in couple of months. One thing I have learned is the pressure of the assets under management; I believe that a fund manager can not satisfy all his investors' needs and requirements. My philosophy is to remain consistent with my fundamental values and trust in managing my strategy. I must say that the top management at Dexia AM was always supportive and never too muchintrusive in the way we managed our strategies. They even protected us, the fund managers, during difficult time where they had to deal with critical issues, allowing us to continue to do our job without external pressures.

How do you see the 10 years ahead?

I feel like a craftsman. My job is to fine-tune my strategy everyday to adapt to market changes, to new rebalancing factors Capacity has always been an issue. Out of a portfolio of € 1,5 billion under management, our portfolio would typically be € 300 million long and € 300 million short with the balance in cash instruments. Market opportunities are larger in the US because of the size of the markets and large market players such as the pension funds, rebalancing their portfolios.

Is the UCIT format appropriate?

We always believed in the UCIT vehicle at Dexia AM and have one of the larger range of UCITs funds under one brand. I never used leverage and value the high liquidity of the fund for investors. The UCIT format has allowed us to have a large range of investors.

About Emmanuel Terraz

Emmanuel Terraz, 42, is Dexia Index Arbitrage Lead Fund Manager. A graduate of the EcolePolytechnique, he worked from 1997 to 2003 on proprietary trading desks at Soci©t©G©n©rale in Paris and at Barclays Capital in London. At Barclays Capital, he was global head of Index Arbitrage in the Equity Derivatives department. Emmanuel joined Dexia Asset Management in 2003. He was responsible for developing the fund Dexia Index Arbitrage, which he has managed since its inception in 2003.

About Dexia AM

Dexia Asset Management is an asset manager specialized in financial analysis, fund management and institutional and private mandates. Dexia AM is a first-tier, pan-European player managing EUR 73 billion (as at end June 2013) in assets, distributed among a full range of investment vehicles, including traditional management, alternative management and sustainable management. Dexia Asset Management has management teams in Brussels, Luxembourg, Paris and Sydney and sales teams throughout Europe, Australia and the Middle East.

www.dexia-am.com



 
This article was published in Opalesque UCITS intelligence.
Opalesque UCITS intelligence
Opalesque UCITS intelligence
Opalesque UCITS intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SEC charges 19 investment firms and one trader for breach of Rule 105[more]

    Benedicte Gravrand, Opalesque Geneva: The Securities and Exchange Commission (SEC) started a push to enhance the enforcement of Rule 105 of Regulation M last year to uncover hedge funds and private equity firms that have illegally participated in an offering of a stock after short selling it duri

  2. Fund managers, bullish on Europe, anticipate monetary policy separation of Fed and ECB[more]

    Komfie Manalo, Opalesque Asia: At least 202 fund managers with $556bn of assets under management said that while the European Central Bank (ECB) has eased its monetary policy that sent sentiments towards Europe to pick up, the Fed is expected to hike its rate in the spring of 2015. Investor

  3. Institutions - North Carolina workers call on state pension to dump up to $6bn in hedge funds, UK pension fund criticizes hedge fund fees[more]

    North Carolina workers call on state pension to dump up to $6bn in hedge funds From Forbes.com: The State Employees Association of North Carolina this afternoon called on state Treasurer Janet Cowell to withdraw all investments in hedge funds, which appear to amount to approximately $6 b

  4. News Briefs - Limited partners of investment managers may be subject to self-employment taxes, Just one week left until NYC's Rocktoberfest[more]

    Limited partners of investment managers may be subject to self-employment taxes On September 5, 2014, the Internal Revenue Service (“IRS”) issued Chief Counsel Advice 201436049, concluding that members of an investment manager were subject to self-employment taxes with respect to their e

  5. Institutions - Adviser's faith in hedge funds unshaken by CalPERS' move Advisers weigh in on CalPERS’ decision, Gina Raimondo sees no reason to follow California’s lead, exit hedge funds, Danish pension funds step up 'alternative investments'[more]

    Adviser's faith in hedge funds unshaken by CalPERS' move From WSJ.com: Financial advisers who use hedge funds in their clients' portfolios say they aren't rethinking that approach after a huge California pension fund announced plans to exit the hedge-fund market. The decision by the Cali