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B. G., Opalesque Geneva: A successful short-term CTA that soft-closed about three years ago has re-opened to outside investors.
In 2021, Princeton, NJ-based PlusPlus Capital Management struck an agreement with a large, well-known investor which involved exclusivity rights for a period of time, so the strategy, Global Alpha, closed to outside investors. This period of exclusivity has now come to an end.
Uncorrelated
PlusPlus Global Alpha seeks to provide alpha which is uncorrelated with all major indices. Between launch in January 2018 and August 2024, its correlation to the SG CTA index was 0.3, to the S&P 500 -0.1, and to the HFRX Global -0.2.
To achieve this, the strategy exploits the behavioural inefficiencies of market participants through the short-term trading of futures and options on futures (interest rates, metals, equity indices, energies, currencies and agriculture).
PlusPlus' short-term program uses trading signals based on the current volatility regime of the market. By staying short-term, the strategy can capture pivots in the market environment and position accordingly.
The managers use a proprietary technology platform they built internally over several years to monitor market volatility and other trading signals. In this platform, "a portion of our futures trades are converted into options trades at opportune moments in the market," explains co-founder Kapil Rastogi. "For example - if our program tells us that U.S. 30-Yr Bonds are bullish in the near future and our implied volatility database tells us that implied volatility is simultaneously set to rise as well, then our program will put on a portion of this trade via long call options. During a period of global turmoil, this combined position will significantly outperform while having a limited downside."
The founders, Murat Unluer and Kapil Rastogi have worked together for over seventeen years at leading CTAs. Previously, they were senior traders at New York-based CTA R.G. Niederhoffer Capital Management and ISAM (International Standard Asset Management), before launching PlusPlus Capital Management and registering with the NFA in 2015.
Strong Sortino ratio
According to Rastogi, Global Alpha is unique as it has the strongest Sortino Ratio of all CTAs in the SGCTA and SGTTI Indices. The Sortino ratio differs from the Sharpe ratio in that it only considers the standard deviation of the downside returns, rather than that of the entire return stream. The strategy reduces the drawdown of a portfolio of hedge funds or CTAs in addition to having a statistically significant positive skew - in contrast to the SGCTA and SGSTTI indices which have statistically significant negative skews.
The SG CTA Index is currently up 3% YTD, and the SG STTI (Short Term Traders Index) up 0.37%.
"We are one of the few hedge funds that perform very well in equity meltdowns while also preserving capital during equity bull markets," Rastogi adds.
For example, the strategy performed strongly in March 2020 when the S&P 500 dropped 30% on a peak-to-trough basis as the Covid-19 crisis had just got started. It also performed well in December 2018 when the S&P 500 fell 16% on a peak-to-trough basis, as investors feared a central bank ready to tighten monetary policy, a slowing economy, and an intensifying trade war between the U.S. and China, according to CNBC.
Recently, the managers added over 25 new futures markets to their program, "which was an enormous research endeavour," Rastogi says. "As part of our corporate culture, my partner and I play a significant role in scrubbing all of the data ourselves along with our wonderful team of analysts who work tirelessly - they are truly amazing human beings. As I mentioned in our Opalesque video, culture is often undervalued, but a significant contributor towards long-term success."
The managers offer six different share classes for the program through GalaxyPlus, a managed account platform, namely 1X, 2X, 3X, 4X 5X and 6X. For example - the investor who invests in the 2X would get the returns multiplied by 2 (both positive and negative returns would be multiplied by 2), the investor in the 5X would get the returns multiplied by 5 (both positive and negative returns), etc.
Related article:
13.Dec.2019 Opalesque TV: How to build a lasting hedge fund business
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