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Jonas Stark

Blue Diamond Asset Management - Best Statistical Arbitrage Hedge Fund


Blue Diamond Asset Management is an independent privately owned company based in Pfaffikon, Switzerland. The team of 4 investment professionals and one COO has a singular focus on the Non-Directional strategy. The strategy uses systematic, proprietary investment processes to capture opportunities arising in the equity volatility markets to generate attractive risk-adjusted returns. Since the strategy launched on 30 September, 2011 it has generated a gross annualised return of 31.9 per cent, 21.6 per cent net. 

The fund itself commenced trading on 1st May, 2012. To demonstrate the robustness of the strategy, it has generated +0.7 per cent average monthly return during negative S&P 500 months and 3.3 per cent average monthly return during positive S&P 500 months. Its AUM is approximately USD168 million (as at 29th February 2016), the majority (65 per cent) from UK and US pension plans.

"We believe that market inefficiencies exist and that while these inefficiencies wax and wane, robust research, rigorous risk management, and diligent position management can allow a manager to continue to maintain its edge. This is especially true in new markets like the VIX futures and options, which have certain structural attributes, and where there are an increasing number of new and diverse volatility-related exchanged traded and privately placed products," comments Jonas Stark (pictured), CEO/CIO of Blue Diamond.

"The Non-Directional strategy is built on the insight that volatility is a new and relatively inefficient market. The strategy's systematic investment process seeks to identify and exploit inefficiencies arising from the price level and term structure of liquid equity market volatility-related instruments. It establishes spread positions to capture these inefficiencies," explains Stark. 

Blue Diamond's systematic trade execution process uses a portfolio management system that has been built entirely in-house. The system performs several tasks throughout the day. Among them, it calculates the specific contracts and exact quantities to be traded, it reconciles trades with all brokers every 15 minutes and it monitors risk limits in real time. 

Stark explains that Blue Diamond's risk management is founded on the structural attributes of the equity volatility term structure and is integrated directly into its investment and trading processes. 

"In addition to managing traditional market risks, the strategy manages idiosyncratic risk resulting from strong spikes or drops in equity volatility, so we regularly run scenario analyses to determine possible impacts on the strategy. The results of these tests are combined with Value-at-Risk measures and position limits," says Stark. 

2016 has already proven to be a volatile start to the year. This has played directly to the strengths of Blue Diamond. The strategy is up +3.95 per cent (net) through February. "In January and the first half of February we saw strong interest in selling volatility, which created interesting opportunities," confirms Stark. 

On winning this year's award, Stark comments: "We feel honoured to win industry recognition like this.

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