Fri, 26/10/2007 - 07:00
Horton Point LLC recently announced plans to launch a quantitative multi-strategy vehicle in the fourth quarter of 2007. In this interview CEO Dimitri Sogoloff discusses the investment process and prospects for the new fund.
Sogoloff, who co-founded Alexandra Investment Management, a USD1 billion plus relative value hedge fund, began looking into quantitative aspects of finance several years ago. After leaving Alexandra in 2006, Sogoloff founded Horton Point and joined forces with several highly visible quantitative professionals, including Vladimir Finkelstein, the firm's Chief Science Officer. Finkelstein is a former Managing Director and head of Quantitative Credit strategies at Citadel Investment Group in Chicago. Prior to Citadel, Finkelstein was a global head of credit derivatives analytics at Goldman Sachs and a US head of quantitative fixed income at JP Morgan.
The new fund, named 'The Gallery Fund' after a lighthouse observation gallery, will have a master/feeder structure with both an offshore and domestic feeder.
HW: What is the background to your company?
DS: Horton Point LLC was founded in October 2006 by a group of highly accomplished industry professionals united by a single goal: creation of a scalable and repeatable investment process, utilizing the latest advances in physical sciences.
Since our launch, we've built a world class research team, consisting of 12 PhD's in disciplines ranging from statistical mechanics and plasma physics to applied mathematics and biology.
In addition, the firm has developed strategic links with non-financial quantitative research firms specializing in cognitive science, mathematical linguistics, and computational biology. We believe that there is a significant opportunity for convergence between next generation computational approaches in these sciences and finance.
The firm has developed proprietary technological infrastructure to support research and production (algorithmic trading).
The firm's founding principals are Dimitri Sogoloff (formerly co-founder and President of Alexandra Investment Management) and Vladimir Finkelstein (formerly Managing Director at Citadel Investment Group).
HW: Who are your service providers?
DS: Our service providers are as follows - Prime Brokers: Credit Suisse and Deutsche Bank; Auditors: Eisner LLP; Administrator: Olympia Capital .
HW: How and where do you distribute the fund? What is the profile of your current and targeted client base?
DS: We distribute internally, targeting institutional investors.
HW: What is the investment process of your fund?
DS: Our investment process begins with rigorous research, development, testing, and staging of algorithmic investment strategies. To be included in the portfolio, each strategy must exhibit a definable and repeatable alpha over a specific time horizon. The Strategy Testing Team looks at critical characteristics, such as: correlation with risk factors over a market cycle; drawdown patterns; cyclicality of returns; stress tests; liquidity and capacity.
HW: How do you generate ideas for your fund?
DS: Ideas are generated by our research group, who design multiple algorithmic investment strategies across all asset classes.
HW: What is your approach to managing risk?
DS: It so happens that every senior member of our investment team has years of hands-on risk management experience in their respective asset classes. At the end, we combine the science and the art by utillizing very sophisticated technology to measure risk exposures and very straightforward rules to manage them.
HW: What opportunities are you looking at right now?
DS: In our multi-strategy format, there are numerous opportunities which can be explored and exploited with sophisticated quantitative techniques.
HW: What events do you expect to see in your sector in the year ahead?
DS: We believe that many investors will realize limitations of a 'single model' portfolio and will look to firms which can provide scalable alpha through consistent quantitative process. Another change going forward is a possible shift away from purely statistical arbitrage strategies, in light of their performance in August of 2007.
HW: How will these changes/future events impact on your own portfolio?
DS: We expect these changes will have a positive impact on all serious quantitative firms which utilise a multi-strategy approach, including ours.
HW: What differentiates you from other managers in your sector?
DS: We have a world class research team which combines scientists without any previous exposure to finance and seasoned investment professionals. A high calibre quantitative firm is about the quality of its research team and robustness of the research process.
HW: Do you have any plans for similar/other product launches in the near future?
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