Thu, Nov 23, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Australian firm offers negatively correlated alpha

Monday, October 08, 2012

By Beverly Chandler, Opalesque London:

Sydney headquartered Triple 3 Partners was set up in 2009 by Simon Ho, its director and CIO. Based on his earlier experiences in the alternative sector - at Goldman Sachs, Deutsche Bank, and JP Morgan, around the world - Ho started out by designing a product, based on what he believed investors wanted.

In an interview with Asia Pacific Intelligence, Ho explained: "I had a previous incarnation in the alternative space so we boiled down what people tell us what they want and built that product for them. They wanted absolute returns; tight risk control and also negative correlation to equity in downmarkets, conditional negative correlation."<p>

With his business partner, Ho developed a volatility overlay product, with a volatility forecasting model plus an algorithm that helps them build a portfolio of options that give them the highest probability of achieving certain aims. "We basically built a better mousetrap" Ho says. And a mousetrap that fulfilled their initial three aims of absolute returns, tight risk control and conditional negative correlation.

Their flagship product is the NCA, the Negatively Correlated Alpha, which captures alpha from options markets whilst targeting strong negative correlation with the S&P500 during volatile periods. The strategy is implemented exclusively using exchange listed VIX options giving it deep liquidity, whatever the market conditions.

The firm conducted no marketing from 2009 to January this year, waiting to be able to produce proof that the system does what it says on the tin. However, word got out and during this period it was picked up, evaluated and given a high rating by Mercer and selected for the Deutsche Bank db Select Platform. It is also included in a Van Eyk fund, the Volatility Buffer, designed to act as a buffer for people invested in equities. In addition, Triple 3 currently supplies quantitative options research services to three of the largest investment banks and proprietary trading firms around the world.

The firm now has $250m under management. Gross returns for the NCA show 2011 clocking up at 9.51% and 2012 at 9.53%. The system has consistently appeared in the top 10 of performers on the db Select platform. Their Vami chart shows that the system can make money in all markets. "In two years since inception there has not been a single day where the quarterly returns in the S&P 500 has been negative and we have been negative" Ho says.

Part of the drive to create this product came from the debate mid 2010 on tail risk hedging. The firm published a white paper in September 2010 on volatility overlay, aiming to provide a counterpoint to tail risk hedging. "It has a negative expected value" Ho says. "You expect to lose money on it - you are better off if you put your money under the bed than buy a tail risk product" he says.

Opalesque produced a series of pieces on tail risk. You can access them here Part One. Part Two here; Part Three here and Part Four here.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific 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. Tourbillon Capital, a $3.4bn hedge fund that's been sounding the alarm about 'frothy speculation,' is suffering big losses[more]

    From Businessinsider.com: Tourbillon Capital, a $3.4 billion hedge fund firm led by Jason Karp, is suffering. The firm's flagship Global Master fund is down 3.5% for the first 17 days of November, bringing performance for the year to November 17 to a loss of 10.6%, according to a note to investors s

  2. Fund Profile - The Tiger of Silicon Valley: Glen Kacher's sizzling hedge fund[more]

    From Forbes.com: When you live and work in a town where the median home costs $2.7 million and hobnob with the executives of billionaire factories like Facebook and Tesla, it's easy to see why you might think technology stocks are invincible. So far in 2017, the Nasdaq Composite index has gained 25%

  3. Launches - Asset manager launches Europe's first bitcoin mutual fund, Prime Capital Aviation Debt Fund enables aviation debt investments for institutional investors[more]

    Asset manager launches Europe's first bitcoin mutual fund From Coindesk.com: A French asset manager has announced the launch of Europe's first mutual fund centered around bitcoin. Announced today, Tobam's alternative investment fund perhaps represents the latest bid to attract institutio

  4. Legal - Consumers say hedge fund financed illegal tribal lending, New York's highest court permits shareholder of a Cayman-incorporated company to bypass Cayman law and bring derivative action in New York[more]

    Consumers say hedge fund financed illegal tribal lending From Law360.com: Vermont residents on Tuesday hit a hedge fund with a proposed class action in federal court alleging it helped concoct a sham tribal payday lending scheme meant to skirt laws preventing companies from charging cons

  5. Investing - Tech still hedge funds' sweetheart sector: Goldman Sachs, Hedge funds haven't been this leveraged to buy stocks since the bull market began, Top financials hedge fund details short bet against Morningstar, Fund CRC presents an offer for Carige's consumer credit unit, Hedge funds sell shares in Altice USA after difficult quarter[more]

    Tech still hedge funds' sweetheart sector: Goldman Sachs From Reuters.com: Tech stocks remain the largest net sector exposure for equity hedge funds, which are set to deliver their strongest returns since 2013, Goldman Sachs said on Wednesday in a note on the industry's most and l