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Wavelength Capital Management – Best Liquid Alternatives ’40 Act Fund

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Established in 2013, New York-based Wavelength Capital Management is an independent investment management firm specialising in liquid, transparent, and cost-effective investment solutions designed to preserve assets and produce returns in any economic environment. 

“We focus on factor-based fixed income analysis powered by technology,” says Mark Landis, who co-founded Wavelength with Andrew Dassori. “We invest using a systematic approach that applies quantitative tools to process fundamental economic and market information. We seek to empower our clients through transparency in what we do, sharing our research process, and our mission is to deliver the best balance of risk and return for their financial future.”

The utilisation of technology to look at a broader set and sub-set of the markets continues to grow. The edge that people had in the past has changed quite dramatically thanks to technology advances and as Landis states: “At the end of the day, we are trying to give all investors the ability to access an institutional process to manage assets across the fixed income universe.”

Wavelength analyses up to 100 years’ worth of historical data and uses a series of algorithms as part of a rules-based system to manage client capital. The firm’s flagship product, the Wavelength Interest Rate Neutral Fund, is a ‘40 Act mutual fund managed with a quantitative, systematic process that seeks to produce returns and preserve capital in any interest rate environment.

“The strategy is designed to provide fixed income risk with a return that has no relationship with rates, and we use codified, testable, data-driven investment logic as opposed to a discretionary process; this lets us process fixed income data more efficiently than what would be humanly possible,” says Dassori. “The core of the strategy is based on linkages between markets and the economy that are testable and can be used to create a repeatable edge. The system is adaptive which allows us to use new types of data and the latest technology to execute on the investment logic it has built over time.”

Wavelength manages risk systematically from a top-down perspective as well as from the bottom-up, on an instrument-specific level, to control for a variety of risk measures and dimensions including liquidity, volatility, skew, position concentration, net and gross exposures, and sensitivity to a range of economic scenarios. 

While factors have been around for decades and are well-known among equity market investors they, are less common in the fixed income space. This is partly due to a lack of data that has existed traditionally, but technological advances and regulatory reform have helped change this.

“We’ve used proprietary datasets since starting the firm, but an interesting development has come from regulation that results in the increased availability of data for fixed income markets,” explains Dassori. “A decade ago much of the information on fixed income markets wasn’t available, and we spent a considerable amount of time rebuilding and re-engineering datasets to make them useful for factors of carry, momentum and value.”

“The ability to scrape and access new types of information has given us a better opportunity. The process took a long time to build but we’re not a black box by any means. We show investors exactly how and why we are delivering value,” adds Landis.

On winning this year’s award, Dassori concludes: “We appreciate the recognition for what we have built, and we look forward to helping investors navigate unfamiliar risks and a growing opportunity set for investing systematically in fixed income markets.” n

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