Quantitative hedge fund manager 80 Capital has opened its Helium strategy to external investors following a 23-month trading run and the acquisition of substantial seed capital.
The Helium strategy, developed and run by former Deutsche Bank quantitative executive Philippe Azoulay, is being spun out as the first external investment of newly established 80 Capital LLP, which has received USD50m in seed capital investment from the bank.
“Receiving this level of institutional backing is unprecedented. It demonstrates the power of the Helium strategy,” says Azoulay.
Helium outperformed most of its managed futures peers in the 23 months from February 2012 with an average annualised outperformance of approximately 10 per cent against major managed futures indices in a generally challenging period for managed futures. It had more positive months than its benchmark indices (64 per cent) and a positive Sharpe ratio.
“By using a variety of techniques to catch statistical phenomenon on a medium- to long-term horizon and under a strict risk control structure, Helium is able to offer real alpha-generating power,” says Azoulay.
Helium divides the trading universe into clusters of futures contracts, from which combinations of contracts are filtered and then systematically analysed to find trading signals. It generates alpha from correlation deformation as well as from price movement. The majority of quantitative funds build positions incrementally based on a signal strength type of criteria, such as the number of standard deviations above a threshold. However, this approach can lead to overweight positions with no statistical robustness that can quickly lose value. Helium, by contrast, uses techniques that aim to eliminate the threat of exposure to a sudden fall.
“It’s about estimating how wrong we can be and then confronting that probability. That gives us a performance edge over the medium and long term,” Azoulay says.