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Alternative Market Briefing

Doshi: The right investment at the wrong time is the wrong investment

Wednesday, October 13, 2021

Heeten Doshi
B. G., Opalesque Geneva:

"The market is the collective behaviour of the many, not the few. If you can understand that behaviour, you can understand the market. Technical analysis, market data or behavioural analysis on their own cannot hope to deliver reliable market predictions. Reliable predictions come from combining these approaches," says fund manager Heeten Doshi, who will present at the Small Managers BIG ALPHA Episode 4 webinar on October 21st.

That sums up his view on running a successful market timing strategy. And the numbers support the philosophy.

Market timing is the act of moving investment money in or out of a financial market or switching funds between asset classes, based on predictive methods.

Heeten Doshi founded New Jersey-based Doshi Capital Management in 2011 with the goal that investors should be able to generate returns in any market environment, including events such as the 2000 dotcom crisis and the 2008 housing crisis. He has more than 25 years of investment experience with previous positions at Brown Brothers Harriman, Morgan Stanley, and Lehman Brothers. During that time, he acquired a deep understanding of the many factors that could signal "risk-on" or "risk-off" periods in the markets.

His systematic market-timing fund distils this understanding into highly reliable predictive algorithms which generate a high conviction signal, aiming to provide strong returns by taking long positions in S&P500 index futures during risk-on periods and taking long positions in long-dated fixed income during risk-off periods.

"By avoiding just the worst week every year, a $1 million investment in the S&P held from January 2000 to the end of 2020 would be worth over $14 million more," he said.

The Doshi Systematic Strategy Fund was launched in 2011, but only recently opened to outside investors after a long development phase. Indeed, it was employing a discretionary and systematic strategy using mainly ETFs up until 2019 and then shifted to a fully systematic stance using mainly futures and less leverage. Human bias was removed from the strategy and a systematic stop loss was implemented to provide risk management and downside protection. The Sharpe ratio also dramatically increased, from 0.3 to 2. The finalised strategy shifted the performance, which went from annualised returns of almost 6% to 69%.

"We believe that no single dataset or technique can reliably time the market," he said. "Instead we combine multiple signals from different datasets and techniques to produce a single risk on or risk off prediction. We use intra-day, daily, weekly and monthly data as inputs to our multiple-speed algorithms to provide the most reliable possible combined signal."

The fund is algo-driven; it uses a proprietary model that determines risk-on and risk-off periods for the overall U.S. equity market and takes into account a multitude of investing disciplines. It returned 147% last year against the S&P500's 16% return. This year, it is up 5.7% YTD (as at end-Sept.), compared to the S&P 500's 14.7%.

Next webinar:

Small Managers - BIG ALPHA Episode 4
When: Thursday, October 21st at 10:30 am ET
Free registration:

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.

We are proud to present you Episode 4 of this groundbreaking webinar series with the following carefully screened panel of investment managers:
- Heeten Dosch, Doshi Capital Management
- Craig Reeves, Prestige Funds
- Randy Baron, Pinnacle Associates
- Andreas Schweitzer, Arjan Capital

Related article:
03.June.2021 Opalesque TV: Systematic hedge fund thrives on market timing

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