William Wong, director of Qbasis Capital Management, argues that after a successful year in 2008 while other hedge fund strategies stumbled, the firm’s systematic managed futures funds
William Wong, director of Qbasis Capital Management, argues that after a successful year in 2008 while other hedge fund strategies stumbled, the firm’s systematic managed futures funds are well placed to attract assets this year from investors looking for diversification to protect their investments.
HW: What is the background to your company and funds?
WW: Qbasis is a young group that specialises in systematic managed futures. The group was founded by Florian Wagner and currently has around USD21m in assets under management.
Qbasis has developed two proprietary trading systems, MF Trend (GS) and MF Plus (VBS), which have been in trading for managed accounts since early 2006. MF Trend (GS) is a global trend following strategy, whereas MF Plus (VBS) is a swing reversal and counter-trend strategy.
Both systems are designed to have the ability to perform individually but in the same time should complement each other. In April 2008, the Qbasis Futures Fund was launched to deliver a combination of these two systems, and last October 2008 the firm launched the Qbasis Multus Fund, which is tailored for Asian investors.
HW: Who are your key service providers?
WW: We have been working with different business partners. Our legal service providers include Solomon Harris and Ogier. We also work with Ernst & Young as our auditor, Trident and Amicorp for fund administration, Scotia Bank & Trust as custodian and Rosenthal Collins Group for brokerage services.
HW: How and where do you distribute the funds? What is the profile of your current and targeted client base? What is the split of your assets under management between institutional and private clients?
WW: We distribute our products mainly in Europe, the US and the Asia-Pacific region. In Asia, we mainly distribute through local distribution partners such as financial institutions and securities houses. Currently, our target clients in the region are high net worth individuals who look for portfolio diversification. As a group, our investor base is split roughly 50:50 between institutions and high net worth individuals.
HW: What is your investment process?
WW: The two Qbasis systems trade almost all of the liquid and actively traded futures globally 24 hours a day, five days a week. The investment process is systematic, and once the systems identify trading signals such as breakout, trend following, swing reversal, oscillators and regression, they will automatically execute and send trade orders directly to exchanges.
HW: How do you generate ideas for your funds?
WW: The investment ideas are generated wholly by the systems based on different trading signals of technical analysis without any human emotional influence. The efficiency of the trading systems is monitored constantly and there is ongoing research into further trading strategies.
HW: What is your approach to managing risk?
WW: We managed our risk through different principles. First it is about diversification. Risk is fairly distributed over more than 70 liquid futures markets spanning some eight different sectors. Secondly, lot sizes and distance to stop loss are automatically adjusted to volatility. This leads to constant risk per market position and allows the strategy to handle markets with different volatility.
HW: How has your recent performance compared with your expectations and track record?
WW: Our recent performance has been in line with our expectations and track record. For example, during the market meltdown in September and October, MF Trend (GS) and MF Plus (VBS) were able to deliver 27 per cent and 51 per cent returns respectively.
HW: What opportunities are you looking at right now?
WW: As there are many developments ongoing at the macro level, we expect strong trends on the way and our systems should be able to benefit substantially from them.
HW: What events do you expect to see in your sector in the year ahead?
WW: Managed futures was definitely the winner in the alternative world in 2008. Given its outstanding performance in the worst moments during last year, we expect to see the assets under management of the strategy to grow in 2009 despite the redemption pressure faced by most other hedge fund strategies.
HW: How will these developments affect your own portfolio?
WW: The popularity of managed futures is definitely a plus for us.
HW: Are investors’ expectations moving towards capital preservation? If so, how do you deal with this?
WW: Yes. Cash preservation is currently a top focus for most investors. Yet given the current low interest rate environment, returns would be minimal if a large portion of investors’ assets kept in cash. As inflation may become a threat in near future and historically our performance has demonstrated a very low correlation to other asset classes, we focus on how our products bring the ultimate diversification solution for investors.
HW: What differentiates you from other managers in your sector?
WW: Compared with many of our peers, our MF Trend (GS) system has the ability to recognise trends at early stages. There is also an additional component in the system to capture intraday movements.
The MF Plus (VBS) system, on the other hand, was designed to capture swing reversals and profit in sideway market movements or potential trend reversals. A combination of these two systems provides us a unique and sophisticated product in the managed futures universe.
HW: Do you foresee problems in raising mandates from investors through 2009? If so, what factors will drive investors back to your funds?
WW: Given the destructions in the financial markets during the past 18 months, asset raising is more difficult than ever. However, the liquidity and low correlation to other asset classes characteristic of our funds provide us with an edge over other funds.
HW: Are you planning any mergers or acquisitions this year, given the talk of further consolidation in the industry?
WW: No. We will focus on marketing our funds and research on new system in the next 12 months.
