The Aspect Capital Diversified fund does as its name suggests by trading in more than 100 markets including bonds, interest rates, stock indices, currencies, energies, metals and commodities.
The company believes it can exploit market trends, which are the result of crowd behaviour, with long-term trends reflecting the activity of strategic investors such as major institutions, plus short-term trends resulting from active traders such as market makers.
Through this approach the fund aims to generate long-term capital growth of more than 20% pa, with target volatility of 17.93%.
A geographical focus of the fund is US/Canada 36.71%, followed by Europe 26.19%, Asia (excluding Japan) 9.23%, Japan 7.2%, global emerging markets 0.68% and other foreign exchange 20%. The fund has $197.64m in assets under management and a minimum investment of $100,000.
The Cayman-domiciled fund charges an initial fee of 2% with a performance fee of 20% subject to a high watermark and allows monthly redemption in both its euro and dollar share classes.
Launched in December 1998 it is under the stewardship of Eugene Lambert.
After working for Morgan Stanley in New York, Lambert joined AHL in 1992 with responsibility for the development and management of its proprietary trading system environment. Appointed head of trading systems in 1994, he led a move to 24-hour, real-time trading, and re-engineered the trading systems. Lambert joined DE Shaw in 1996 and left in 1997 to form Aspect. He holds a BSc in Computer Science and Electronic Engineering from King's College London and a DPhil in Adaptive Control Systems from Oxford University.
A key factor in the firm's trading style is discipline. It uses quantitative trading systems to research, develop and implement its product range. This has several advantages, according to the firm, including speed of data analysis, a clearly defined transparent investment strategy and less reliance on highly paid traders.
The research process follows a step-by-step process, which translates the firm's market behaviour hypothesis into automated trading systems.
In each market Aspect applies up to 10 different trading systems ' the slowest system trades on average twice a year, while the fastest trades around 60 times a year.
The systems were selected to maximise portfolio diversity, with the slowest systems designed to capture medium and long-term market trends. The fastest are designed to capitalise on short-term market movements. According to the company, there is almost no correlation between the slow and fast systems.
Trading model allocation is determined by 'slippage'. Each time a trade is made, Aspect records the price at which the trading system has been triggered and the price at which the order is filled ' this is defined as slippage. In addition to this the market volatility and contract size are taken into account to generate a risk-normalised measure of slippage.
Low slippage, highly liquid markets, such as bonds and energies are suitable for fast trading systems and fast trading, while high slippage markets, such as agriculturals are more suitable to slow systems.
Aspect has aimed for maximum diversification within the fund. The company is constantly examining new, liquid and uncorrelated markets to include in the fund in order to improve its risk/reward ratio and capacity.
Diversification is strengthened further through a lack of market or sector preferences, because the company believes when allowing for slippage, equal profitability can be achieved in all markets in the long term.
The key factors in determining market allocations are correlation and liquidity. Correlation is analysed by sector, sub-sector, economic block and market levels. Individual market allocations range between 1% and 2% of the portfolio risk, with a maximum level of 3.2%.
Risk control consists of measures at market, portfolio and operational levels. Market diversification ensures the risks associated with exposure to any individual market are reduced and positions are scaled according to market volatility to reduce risk further.
At the portfolio level the company uses Value at Risk methodology and at an operational level it runs a 24-hour execution team monitoring risk and making sure trades are executed efficiently in all time zones.
The speed of analysis and order execution determine slippage and therefore profitability, Consequently, Aspect has designed its implementation so positions can be reviewed and trades signalled in less than a second.
n For more information on the fund call 020 7170 9700.