HFT Capital founder chief investment officer and head trader Romy Jardine and head of business development Bob Torkelund (pictured) say that in a difficult market environment where investors are extremely cautious and nervous, highly-performing niche strategies that “dare to be different” are still capable of attracting money from investors seeking non-correlated returns.
GFM: What is the history and background of your company, principals and fund?
RJ/BT: HFT Capital is a Gibraltar-domiciled management company with a strategy of high-frequency futures trading, mainly in index, oil, gold, wheat and some currency futures.
The company was established by Romy, the main shareholder, chief investment officer and head trader, in January this year, and the first fund, the HFT Capital Evolution Growth Fund was launched on May 7. Trading started in July after some administrative work and account opening hurdles.
Bob joined the company in April as head of business development and fund director and is providing support on the fine-tuning of strategy, service level agreements and development of asset gathering and distribution. Robert Holmes joined in May as compliance officer.
The Evolution fund was launched with GBP2.5m and has attracted the attention of several family offices and other portfolio managers looking for a strategy which is different and a concept that is not so client-hostile.
GFM: What is the structure of your fund?
RJ/BT: The umbrella structure is a Protected Company Cell established in co-operation with Castle Fund Administrators in Gibraltar. The fund can accept US persons under the exception rules if they are experienced investors.
GFM: Who are your main service providers?
RJ/BT: The fund administrator is Castle Fund Administrators, the auditor is KPMG in Gibraltar, and the legal adviser in Gibraltar is Ellul & Co, while our US adviser is Foley Hoag, Our bank connection is Credit Suisse in Zurich, while the fund’s prime broker is Velocity in Chicago.
GFM: What is your distribution strategy and targeted client base?
RJ/BT: Our current investors are high net worth individuals and some clients via portfolio management offerings. The target is further high and ultra-high net worth individuals, private banking departments, family offices, funds of hedge funds and sales forces.
In some countries we will be targeting certain specific products. In the UK the fund is qualified for Small Self-Administered Pension Schemes and SIPPs, and we are looking at similar possibilities in other countries as well. We are looking to speak with advisors and sales forces with the right clientele for this kind of trading strategy.
GFM: What impact has the recent global financial crisis and economic downturn had on your business?
RJ/BT: Because of our scalping trading strategy, having positions only open for up to three minutes, we are not so worried about the direction of the market. As long as they move we can generate some revenue. We may not yet be very well known, but we believe we can attract assets from established players once we are full up and running because of the risk-averse manual trading attitude, the high number of positive trades and hopefully an interesting return for our investors.
GFM: Please describe your investment process.
RJ/BT: We keep an eye on up to 11 futures markets at the same time. Dedicated in-house monitoring of market movements gives us a good idea of what direction the market is moving in the very short term. Accordingly we place our bets in an upward or downward direction, with stop-losses and profit-taking targets placed at the same time as the trade is opened.
GFM: How do you generate ideas for your funds?
RJ/BT: Generally we keep in mind what both clients might discuss during our meetings and see if there is enough scope and demand to create a marketable strategy. In addition, we keep on looking for opportunities such as traders who have new systems, strategies or trading capabilities that look promising, as well as developing our existing strategy and fine-tuning it. During this process we might find something strong enough to stand alone. We constantly look for new ideas and products that could be interesting in terms of our client base and market demand.
GFM: What is your approach to managing risk?
RJ/BT: Risk management is built into the strategy and systems, including stop-losses placed at the same time as the trade opening.
GFM: Are you looking at any particularly attractive opportunities right now?
RJ/BT: Yes and no. We are not looking to take on too much risk in choppy markets with too many sharp turns – we would rather sit and watch.
GFM: What developments do you expect to see in your investment sector or industry field in the coming year?
RJ/BT: We expect some moving of assets in our direction from less well performing funds. Investors seem extremely cautious again, and they don’t understand that not all strategies are correlated with market evolution, as many managers and traders claim. We believe that because of the fast way we trade and take profits, and the short time a position is open in any market, there is no significant correlation. This does not mean that we will never have a loss-making day at the same time as the market, but it is a coincidence from a calculation point of view.
GFM: How will these developments affect your firm and the performance of your fund?
RJ/BT: We believe we will grow fairly fast over the next 18 months.
GFM: What differentiates you from other managers in your sector?
RJ/BT: We are different not only in our strategy. We pay around a quarter of our monthly profits to investors as a distribution. In addition, we have short notice periods, so our investors don’t have to feel hog-tied to us if they don’t like it.
GFM: How do you view the environment for fundraising over the coming 12 months?
RJ/BT: For average performing or below-par funds it will be difficult. The market is not easy and investors are extremely cautious and nervous; the past couple of years have left deep scars. However, I believe that some well-performing niche strategies that dare to be different will attract some money and do well. As there is no sign of economic growth and no big desire for the banks to lend, I guess there will not be much new money, but more switching.
We should also not forget that the compliance demands of regulators and others have grown so much that people will automatically think twice about having to open a new account and dealing with all the know-your-customer and anti-money laundering rules. It has become impossible for smaller providers to get started. Think about how many private banks refuse to offer their clients proper independent advice or service regarding funds that are not in their ‘normal’ basket!
GFM: How do you expect your business to be affected by current and proposed regulatory changes?
RJ/BT: We have already dealt with some of the new rules during the launch of the fund. Our strategy is UCITS-capable but there is not yet an administrator in Gibraltar capable of handling it, although that will come. It is a small centre anyway so they are not geared to handle high volumes, even before we talk about real STP with no hands on.
GFM: Do you have any firm plans for further product launches?
RJ/BT: We are in the process of creating a sister fund for HFT Capital Evolution Growth, the HFT Capital Ultra Growth fund. It is basically the same strategy and trading process and in fact will be traded at the same time as Evolution Growth fund, but run on a higher leverage/margin usage. Naturally it will have higher risk, but the return should in general be higher too.