Mon, 16/03/2009 - 06:47
Robert Hounshell, head of trading at Lexington Asset Management, says the diversification offered by the firm's managed futures trading programme, encompassing 800 systems traded in 40 of the world's most liquid futures and commodity markets, helped it to return 55.25 per cent net of fees last year.
HW: What is the background to your company and funds?
RH: Lexington is the result of the combination of two managed futures firms. Lexington Asset Management principal Mark Helweg has been involved in futures trading, trading system development and CTA management since 1988.
His engineering background serves as a foundation for the quantitative research methodology he uses to design and test superior trading systems. Mark has authored books and several articles about systematic futures trading.
Head of trading at Lexington, I have been a hands-on investment portfolio manager for more than 20 years. My focus is the disciplined execution of Lexington's proprietary trading systems along with portfolio and risk management. I also assist Mark in the system research and testing effort.
The trading programme was launched in October 2006. Assets under management currently exceed USD30m, and last year the trading programme returned 55.25 per cent net of fees.
HW: Who are your service providers?
Accounting is provided by Futures and Hedge Fund Services, our auditor is Spicer & Jefferies, and our law firm is Henderson & Lyman.
HW: Have there been any recent launches?
RH: Lexington Asset Management is in the process of launching a managed accounts structure that will permit investors to allocate through managed accounts as well as in the commingled fund.
HW: How and where do you distribute the fund? What is the profile of your current and targeted client base?
RH: Clients are predominantly drawn from North America. Historically, distribution is focused on high net worth individuals, wealth advisors and institutional investors in the south-eastern US. This year we have launched a series of initiatives to expand marketing efforts to reach a broader range of institutional investors.
HW: What is the investment process of your fund?
RH: We undertake systematic trading of managed futures in 40 of the most liquid futures and commodity markets around the world. We trade more than 800 systems in three time zones, a combination that achieves diversity of markets, trading timing and system.
HW: What is your approach to managing risk?
RH: Risk is managed at both the system level and the portfolio level. At the system level, stop-loss orders are entered in the markets for each open trade. A proprietary filter determines strength of trend and activates different trading systems. The stop levels are calculated by the system algorithm and are designed to exit losing trades as quickly as possible while providing the flexibility to navigate market 'noise'.
Risk management at the portfolio level consists of diversification across markets, system styles, trading time frames and sizing of portfolio positions. Before implementation, all systems have been rigorously back-tested for profitability, risk and stability factors based on historical data.
HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
RH: Last year was one of unprecedented volatility and long-sustained trends, resulting in the trading programme returning 55.25 per cent. Unlike equity long/short strategies, performance of managed futures strategies is not related to prior performance. The strategy can perform on the way up as it did on the way down.
HW: What opportunities are you looking at right now?
RH: We are watching the impact of global stimulus spending on commodity inflation.
HW: What events do you expect to see in the year ahead?
RH: As governments inflate way out of the recession, expect to see commodity inflation on the horizon.
HW: How will these developments impact your own portfolio?
RH: We hope it will result in long-sustained pricing trends.
HW: What differentiates you from other managers in your sector?
RH: The diversity of systems - 800 - and rigid risk management. The principals' net worth is in the fund, and we have stop-losses on every trade.
HW: Do you have any plans for other product launches in the near future?
RH: We hope to build out the managed account offering and open an offshore product in the near future.
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Fri 17/04/2009 - 07:00