Thu, Oct 28, 2021
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Market neutral manager gains on defying the norms

Tuesday, May 04, 2021

Elias Nechachby
B. G., Opalesque Geneva:

The ICON-MoSAIQ-Carmika Market Neutral Strategy was up 9.3% (net) in Q1-2021 after returning 41% in 2020. The manager, Icon Asset Management, attributes the returns to its dynamic and permanent hedge, a behavioural finance bedrock, statistical modelling and artificial intelligence.

"Often when we speak to investors, they wonder how we are able to generate high returns with controlled drawdowns all the more so as we maintain an under-levered equity exposure," portfolio manager Elias Nechachby tells Opalesque.

"Our portfolio's average equity exposure is below 80%, it has a dynamic as well as a permanent hedge. Hedging is more often than not perceived as an additional drag on portfolio performance and as a cost. The reasons for these erroneous perceptions are judgment heuristics, deeply rooted ideas, and misunderstandings that exist in the industry when it comes to leverage, risk, hedging and model design and development; something we will touch upon further during our next Opalesque webinar."

Nechachby, who has spent more than 20 years developing financial software for tier-one asset managers, developed the first MoSAIQ model with behavioural finance as a core paradigm in 2006. He will be presenting in Opalesque's next webinar, Small Managers - Big Alpha, on Tuesday 11th May.

"It's very important in order to create investment strategies that defy the norms, to challenge normal thinking in your design and development processes," he continues. "That's what we strive to do. The strong paradigm that underlies all that we do is behavioural finance. Using on top of this paradigm, statistical modelling and AI empower our endeavour by giving us results more quickly and more efficiently than before these techniques and tools were widely available."

The fund

It is through this process that Icon's flagship strategy was up more than 10% in March 2020 while the S&P500 plunged more than -12%. "Our strategy ended 2020 up more than +40% net with a Sharpe ratio above 3. The Strategy continues to perform this year with a performance of more than +15% net as of the end of April 2021 and maintains a very high Sharpe YTD well above 4," Nechachby adds.

The HFRX EH: Equity Market Neutral Index is up 3% YTD as at the end of April, after returning 8.4% in the last 12 months.

The ICON-MoSAIQ-Carmika Market Neutral Strategy is an all-weather strategy that achieves its returns through the MoSAIQ automated systematic non-discretionary trading of highly liquid stocks and futures, and the Carmika discretionary index options hedge position building. The strategy without the Carmika hedge has been live since September 2016. MoSAIQ and Carmika have combined since the beginning of October 2019. The strategy was up 13.5% in Q4-2019.

The firm

Zurich-based ICON Asset Management, which was mentioned in the Corona Fighters series, was founded in 2006 by Richard Toolen CEO. Elias Nechachby, MoSAIQ's founder, joined later. Before ICON, Toolen worked at Daiwa Securities Europe in Frankfurt and Nechachby at PWC, Sunguard, and TradingScreen.

ICON is a platform that incubates and supports emerging managers with outperforming strategies. The support includes regulation, compliance, fundraising, and pairing with investors.

ICON and MoSAIQ also have their own products that are based on behavioural finance and use artificial intelligence (AI), genetic algorithms, and neural networks to design and develop their models. The partnership ICON-MoSAIQ got a third partner in 2019, London-based hedge fund manager Carmika Partners, to improve on the strategies' robustness.

"The US Market/S&P 500 rose in March 2021 on accelerated COVID vaccination statistics, despite rising government bond yields coupled to rising inflation and economic growth expectation," according to a March commentary. ICON's strategies benefited from good positioning in terms of volatility, hedging, and long stock position. March was the second month in a row where all strategies posted positive performance despite negative pair correlation, a very rare streak.

Related article:
03.Sept.2020 Opalesque TV: Meet a Swiss fund manager who hedges with a difference

Next webinar:

Small Managers - Big Alpha

With larger quantities of capital chasing the same alpha strategies and continuing to erode Alpha, savvy investors are turning to smaller and/or emerging managers as they look for alternative sources of return. Opalesque presents a carefully screened panel of investment managers worth taking a look at.
- Nadine Korehnke, Quantumrock
- Elias Nechachby, Icon Asset Management
- Paul Lucek, Ridgedale
- Richard Simmons, Derby Street

When : Tuesday, May 11th, 2021 at 10:30 am ET
Free registration here:

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. Institutional Investors: Vanderbilt University endowment records 57.1% return for fiscal year, MIT endowment logs 55.5% return for latest fiscal year, AP1 re-tenders $720m emerging markets small-cap mandate, Harvard, world's wealthiest university, sees endowment soar to $53.2bn, San Francisco shifts passive equity mandate to active BlackRock ESG strategy[more]

    Vanderbilt University endowment records 57.1% return for fiscal year From Vanderbilt University's endowment returned a net 57.1% in the fiscal year ended June 30, according to a financial report on the Nashville, Tenn.-based university. The report did not provide benchma

  2. New Launches: Massar Capital launches new global discretionary strategy, White Oak closes latest direct lending fund at $1.3bn, Aterian replicates speedy fundraise to collect $830m in nine weeks, Sofinnova holds $548m final close for Capital X, Multicoin Capital targets $250m for third crypto VC fund, Tobam launches French bitcoin and blockchain fund[more]

    Massar Capital launches new global discretionary strategy Massar Capital Management has launched a new discretionary macro hedge fund strategy which aims to capitalize on directional trading opportunities across a broad set of global markets. The Massar Macro Directional is the N

  3. How Viking Global became the hedge-fund industry's hottest launch pad[more]

    From Business Insider: Since Dan Sundheim's massively successful launch of D1 Capital in 2018, there have been six more spinoffs from Viking Global that have collectively raised billions - and at least one more is in the works. Among them: Grant Wonders, 31, who launched Voyager Global this ye

  4. PE/VC: Moody's warns of 'systemic risks' in private credit industry, Sequoia to restructure itself away from traditional VC model, Modeling private equity market beta, VC investors pour money into Chinese start-ups despite regulatory crackdown[more]

    Moody's warns of 'systemic risks' in private credit industry From FT: The burgeoning private credit industry of lending to buyout groups has grown to about $1tn, but opacity, eroding standards and the difficulty in trading these slices of debt pose "systemic risks", according to rating

  5. PE/VC: Private equity M&A frenzy has cautious undertones, Venture capital exit values soar, Private equity and venture capital drove outsized returns at Bowdoin, Harvard, and the University of Pennsylvania, Private equity tops explosive tech growth as returns rocket[more]

    Private equity M&A frenzy has cautious undertones From Reuters: Private equity dealmakers are in two minds. Buyout barons, led by titans like Blackstone boss Steve Schwarzman, are on track for a record year for takeovers. Yet they're also offloading companies at a much faster pace than