The Hedgeweek Interview: Thaddée Tyl, CEO & Partner, Rivoli Fund Management: "Statistics are not everything"
Thaddée Tyl outlines the quantitative and systematic strategies that have shaped Rivoli Fund Management.
Thaddée Tyl graduated from the Ecole Polytechnique in 1979, and started his career as an Administrator of the National French Institute of Statistics (INSEE), in charge of economic forecasts. In 1986, he joined the Societe Generale group as head of foreign exchange options trading. In 1990, he went to Sydney, in charge of derivatives products for Australia and New Zealand. He then joined FIMAT, the Futures brokerage arm of Societe Generale, in charge of the Asian subsidiaries. He then launched the futures fund activities at BAREP (SG group). He is now CEO and partner of Rivoli Fund Management. Thaddée Tyl with the two other partners of Rivoli created all the strategies and the risk control system implemented in the Rivoli funds.
HW: What is the background to the firm and its funds?
TT: Rivoli Fund Management is an asset management firm which was created in 1996, and is fully owned by its founding partners. Rivoli is registered with the CFTC and the NFA as a Commodity Trading Advisor, and with the French authorities (AMF) as an asset management firm. Rivoli's AUM are close to USD 300 million. The firm has a strong expertise in quantitative asset management techniques, supported by an ongoing and extensive research based on thorough statistical analysis of worldwide financial markets. Today, we manage four different programs using a quantitative and systematic approach, as follows:
- Rivoli International Fund: Diversified futures program launched in 1996.
- Rivoli Managed Account Programs: Different diversified futures program launched in 2002.
- Rivoli Long Short Bond Fund: Low leverage fixed income program launched in 2001.
- Rivoli Equity Fund: Quantitative equity program launched in 2004.
HW: How and where do you distribute your funds? What is your current and targeted client base?
TT: Rivoli's aim is to build long term relationships with institutional investors, banks, fund of funds, family offices and high net worth individuals, as far as they have sufficient experience in hedge funds. We distribute our funds either directly or through third party marketers.
Our main focus is Europe. Nonethless, there is a growing interest from North American and Asian clients.
HW: What is the investment process of your funds?
TT: The firm has a strong expertise in quantitative asset management techniques, supported by an ongoing and extensive research based on thorough statistical analysis of worldwide financial markets. A strong emphasis is put on risk management and allocation techniques, as well as trading strategies which cover a wide range of approaches, including relative values, statistical arbitrage strategies, trend following, contrarian and mean reverting strategies.
Rivoli International Fund: Diversified futures program launched in 1996. RIF uses trend following and contrarian strategies. RIF is offered through a EUR master fund and a USD feeder fund.
Rivoli Managed Account Programs : Different diversified futures program launched in 2002. RIMAP uses trend following, contrarian strategies and strategies that take into account relationships between markets. RIMAP is offered through a EUR master fund and a USD feeder fund.
Rivoli Long Short Bond Fund: Structured as a classic fixed income fund (UCIT III compliant), RLSBF is nonetheless designed to offer absolute returns. RLSBF, launched in 2001, uses trend following and arbitrage strategies on government and futures interest rate markets (no credit risk). Depending on the opportunities within the interest rate markets, the program has the possibility to invest up to 100% of its AUM long of European government bonds and an additional 100% of its AUM, long or short, of futures interest rate contracts worldwide. RLSBF is offered through a EUR fund.
Rivoli Equity Fund: Equity program launched in 2004. REF uses different arbitrage and directional strategies on large cap-stocks and futures. REF is offered through a EUR master fund and a USD feeder fund.
HW: How do you generate ideas for your fund?
TT: It is essential for us to run an ongoing research program. The purpose of research is to and to generate ideas, that is to find and implement new trading opportunities, either in new programs, or in existing ones.
The key competences of a sound research are:
- Knowledge: Research requires a strong background in statistics and mathematics. We run training programs so as to be permanently at the state-of-the-art level in these matters.
- Experience: Statistics are not everything. Strong experience of actual trading is essential for a good understanding of the financial world. This experience often improves intuition, and can also avoid costly mistakes.
HW: What is your approach to managing risk?
TT: Risk management is one of the cornerstones of our business. We have developed many different tools to assess the risk of our trading portfolios, such as volatility and value at risk analysis.
Risk management plays a role at two different levels: at the allocation level, risk management ensures that the risk is fairly distributed between markets and strategies, and at a portfolio level, to ensure that the risk is fairly distributed over time. This "no bet" approach is one of specificities of Rivoli's approach.
HW: How/against what do you benchmark the performance of yours funds?
TT: We have a pure absolute return target, and therefore our only benchmark is the money market. However, it is sometimes relevant to compare the performance of our funds to those of funds believed to have the same approach.
HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
TT: Globally, all our funds are not far from expectations and the current foreseeable market environment do not lead us to change our targets.
HW: What opportunities are you looking at right now?
TT: We believe that the market stills offer a lot of opportunities. However, the entry barriers are quite high, and the easy times are obviously over. In other words, future opportunities will only be available for experienced managers. As a consequence, we also believe that managers will be more and more reluctant to disclose in detail the true nature of their strategies, while at the same time, transparency on the positions and risks will increase.
HW: What events do you expect to see in your sector in the year ahead?
TT: We believe that quantitative trading will attract significant investments in the near future, because last returns prove to be promising, especially compared to other alternative investment styles.
HW: How will these changes/future events impact on your own portfolio?
TT: It should not have any impact on our portfolio, because the capacity of our strategies is much larger than the current AUM.
HW: What differentiates you from other managers in your sector?
TT: It is always difficult to say, because we obviously know what we do, but we have very little information about what our competitors do. The easiest way to differentiate is therefore to compare risk adjusted returns. From that perspective, we are pleased to observe that all our products compare very nicely with theirs competitors.
HW: Do you have any plans for similar/other product launches in the near future?
TT: In the very near future, we plan to launch new products basically using the same approach, but through different structures, and with different risk profiles, in order to meet the needs of our clients.
(Thaddée Tyl was Interviewed on 9 February 2006)
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