But the fund was up more than 16 percent, aided by long positions in crude oil, short positions in Italian bonds, and long stakes in safe-haven bonds such as German bunds, and being short the U.S. In February the market reversed course, and by the end of the first quarter, it had given up all of the year’s gains. By the end of January, the fund was largely out of these positions. The breakout triggered the fund to ramp up U.S., European, and Japanese equity exposure from 50 percent of the fund’s net asset value to 190 percent by January 10. tax cut bill in December 2017, when the market started 2018 with a rush. The success of this approach was most recently demonstrated after the passage of the massive U.S. The typical investment horizon ranges from several business days to several weeks, with eight days being the average duration. Models also establish preset sell and stop-loss orders free of discretionary decision-making that could be affected when racking up gains or losses.īecause futures markets are open 24 hours a day during the business week, the firm always has traders at the helm to sign off on every transaction. The program’s models place 1,500 limit orders for a wide range of futures contracts every day, with 10 to 20 percent of these orders getting executed daily as limit prices are hit. Among a host of other refinement processes, the firm then overlays trends and themes, behavioral factors that contribute to outperformance and underperformance.Īlpha Quest Original (AQO) - the flagship strategy - managed $1.4 billion at the end of 2018. But in tracking equity and bond indices, commodities, and foreign exchange across 80 global markets, the firm’s systems are an amalgam of past and current data points followed over various time frames, ranging from a few hours to several months. This view goes a long way toward explaining Koulajian’s investment strategy, which strictly limits investment horizons, targeting inflection points when the rest of the market hasn’t yet recognized trends that might be reversing.ĪlphaQuest won’t disclose the secret sauce “Human tendency is to underestimate low-probability events.” “My own family history, and what I saw when I was young, informed me that life can go very wrong, very quickly,” the hedge fund manager says. But while he was growing up in the 1970s, Lebanon dissolved into civil war. His father’s side of the family ended up in Beirut - the Paris of the Middle East, or so Koulajian was told. His extended family is part of the Armenian diaspora that fled Turkey in all directions in the early 20th century, when the country’s brutal assault of ethnic Armenians began. Sitting recently in a quiet Italian restaurant on New York’s West 4th Street on a cold winter evening, Koulajian calmly explained an unsettling past: “When you’re a kid and you need to regularly escape to a bomb shelter to survive mortar shelling and bombings, it affects you for the rest of your life.” Nigol Koulajian’s youth was quite different from those of most other hedge fund managers.
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