D-ynamically A-daptable VO-latility S-trategy
October 09
Davos Management The Manager is active in the Alternative Investment area since 1986. While working successfully for banks (UBS, UBAF, CPR) private Fund Manager (CFM) and an insurance (AXA) in either proprietary or fund management devisions, the manager created and developed several highly successful trading systems and Active Asset Allocation programs based on Asset Preservation assumptions. He developed risk adverse strategies for futures and cash markets, applicable in a wide range of markets, i.e. equities, currencies, commodities and interest rates. The DAVOS High Frequency Currencies program is right now operational within a specialised division of one of the major French banks, utilising their highly professional and experienced teams (research and development as well as execution) and infrastructure as well as compliance support. For the time being investments are accepted and managed through Managed Accounts only.
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DAVOS General Overview DAVOS is a trading system designed for the Foreign Exchange Markets DAVOS is a quantitative system which does not rely on visual chart patterns (flags, head and shoulders, triangles…) esoteric price behavior theory (Elliot, Gann, Fibonacci…) advanced tools linked to artificial intelligence (neuro-networks, genetic algorithms)
DAVOS is based primarily on: Support-Resistance computations Price channel breakouts Short-term trend identification At a 60 minute bar chart, trades will appear to be in the direction of the trend but if one looks at a 5 minute bar chart, trades will appear to be triggered on mean-reverting price behavior, or price corrections
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Portfolio Universe As of today, the portfolio trading consists of eight major currency pairs : EUR/USD, USD/JPY, GBP/USD, AUD/USD, EUR/JPY, AUD/JPY, GBP/JPY, EUR/GBP In the near future, the trading universe will be extended to the following currencies: Cross-rates EUR, GBP and CHF Nordic currencies (NOK, SEK) Pacific Rim currencies (SGD, NZD, HKD)
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Position Sizing and Gearing New positions are sized depending on:
an inverse function of historical short-term volatility relative liquidity of each pair, measured by bid-offer spreads During the life of the trade, positions are not resized No pyramiding or de-pyramiding No partial profit taking To reach the volatility target of 8%, gearing will vary between a minimum of 0 and a maximum of 2, 1 being the most frequent value
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Buying and selling levels of DAVOS Buying and selling levels of DAVOS depend : For 25%, on the medium term price behavior, i.e. a few days ( trend, extrema and volatility, but with a different formula)
For 75% on the very shortterm price behavior, i.e. a few hours ( trend, extrema and volatility)
On a chart, DAVOS levels will look like a channel of two parallel broken lines which follow the market price with a very short lag A Long Signal is triggered when the price is above the green-buying level Symmetrically, a Short Signal is triggered when the price is below the red-selling level DAVOS has no bias for long or short position 6
DAVOS is an extremely robust approach DAVOS is best described by the term “robust” Very few parameters Stability of performance and risk-profile under a vast array of parameters No curve-fitting to in-sample data No periodic re-optimization Exactly the same model is applied across all the currency pairs of the portfolio Dynamic adaptability of the model to different market configurations and volatility scenarios
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The operational time unit for orders computation is a 60 minute OHLC bar The operational time unit for orders execution is a 5 minute OHLC bar: European time zone: active trading, new positions Out of European time zone: protective orders only
Most executions (95%) are on “limit-orders”, which enables to neutralize the impact of slippage. The balance is on “stop-orders”
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Summary for DAVOS Trades – EUR/USD June 2003-June 2009
Average holding period of trades: » All trades: » Winning Trades: » Losing Trades:
36 hours 68 hours 17 hours
Total number of trades:
1107
Percentage of winning trades:
40%
Ratio Avg Gain/Avg Loss $:
2.30
Ratio Trade Max/Trade Min:
5.10
Time in the market:
75%
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DAVOS orders generation and execution Today DAVOS orders are managed by traders and executed in the cash currency markets DAVOS is designed to be run on an automated futures trading platform. Execution is then managed by an algorithm which seeks to minimize slippage A dedicated software (OTM, for “Order Transmission Module”) is under development
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ďƒź Market shocks belong to two categories:
Expected Expectedshocks shocks economic economicfigures figures release release(NFP) (NFP)
Unexpected Unexpectedshocks shocks natural naturalor orpolitical political events events
ďƒź DAVOS reacts to both kinds of market shocks in two phases: First phase: five minutes (one OHLC bar) to analyze the impact, and adjust the order Second phase: place a limit order if necessary In exceptional circumstances, a stop-loss order is triggered during the first phase of the process
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DAVOS actual performance
Reults Reults
June 2008-June 2009
Total Return: Return 12 months: Volatility:
+21.36% +22.83% 13.75%
Max Drawdown P/V: - 3.38% Positive Months: 62% Information Ratio: 1.69
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DAVOS assets under management June 2008 :
20 Millions €
October 2009:
63 Millions €
Current estimated capacity:
200 Millions €
Extended capacity: Millions €
500
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DAVOS: actual performance chart June 2008-June 2009
Past performances are not necessarily indicative of future results
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DAVOS: theoretical performance chart June 2008-June 2009
Past performances are not necessarily indicative of future results
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Equity graphs of individual currency pairs June 2003-June 2009
All currency pairs exhibit a smooth, rising equity curve since 2003 A certain number of pairs have been characterized by strong trends which led to strong profits (EUR/USD, GBP/USD) Surprisingly enough, trendless markets did not lead to negative performance (EUR/GBP until 2008) The global performance is the result of eight positive contributors, with no “lame ducks” Green points on the charts indicate new historical equity peaks
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DAVOS bar chart: two examples May 27th 2009 – June 8th 2009 The following two examples are designed to illustrate the behavior of DAVOS under various, recent market configurations Each bar represent 60 minutes of market activity
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DAVOS 60-Minute bar chart: EUR/USD May 27th 2009 – June 8th 2009
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Equity graph: DAVOS on EUR/USD June 2003-June 2009
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DAVOS 60-Minute bar chart: USD/JPY May 27th 2009 – June 8th 2009
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Equity graph: DAVOS on USD/JPY June 2003-June 2009
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Coordinates Franz G. Hoelscher
Bruno Combier
Cell Fix
Cell Skype
+ 33 6 73 19 47 86 + 33 1 47 41 52 98
Email: 3pmparis@gmail.com Website : www.3pm-paris.com
+ 33 6 79 18 03 93 bruno.combier
Email: b.combier@gmail.com Website: www.allbest-trading.com Blog : www.allbest-trading.blogspot.com
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Disclaimer This Teaser (the “Teaser”) has been prepared solely for informational purposes. The purpose of this Teaser is to assist prospective investors in considering an investment in the program DAVOS. The information contained herein does not purport to be all-inclusive or contain all of the information that a prospective investor may desire. In all cases, interested parties should conduct their own investigation and analysis of the program and the data set forth in this Teaser. DAVOS does not make any representation or warranty as to the accuracy or completeness of the information contained in this Teaser and none of DAVOS or any affiliate thereof shall have any liability for any other representations (express or implied) contained in, or for any errors in or omissions from, this Teaser or any other written or oral communication transmitted to the recipient in the course of the recipient’s evaluation of the program. This Teaser may not be photocopied, reproduced or distributed to others at any time without the prior written consent of the DAVOS. This Teaser is not, and shall not be deemed to be, an offer to sell securities or a solicitation of an offer to purchase securities. Any such offer to sell securities or solicitation of offers to purchase securities shall be made only pursuant to a Confidential Private Placement Memorandum in compliance with applicable state and federal securities laws or an applicable exemption therefrom. Any representation by any person to the contrary is invalid and has not been authorized by DAVOS. The purchase of interests in the Fund is suitable only for sophisticated investors who fully understand and are willing to assume the risks involved in the program’s investment program. Except as otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not of any future date. This information will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. An investment in the program is speculative and involves a high degree of risk. For a description of the risk factors and conflicts of interest associated with an investment in the Fund, please refer to the “Certain Risk Factors” and “Conflicts of Interest” sections in the Confidential Private Placement Memorandum of the program.
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