How can a mix of equities, commodities, and currencies work in harmony to deliver steady returns and with moderate risk? We’ve found that steady returns can be achieved through a mix of those assets, while our portfolio construction and proprietary software effectively manage the risks.

Consider foreign exchange, for example, where we take long-, medium-, and short-term trading positions. The medium- and long-term trading strategies, each about 40% of the currency portfolio, are generally the lower-risk/lower-return piece of the portfolio. The short-term currency trading portfolio (20%) is higher risk but higher reward, functioning as an additional alpha driver. Risk is managed through automated software that monitors and limits trader risk to 1% of their capital per day, with a stop loss set at 10% of their portfolio.

We view commodities as the ultimate risk mitigator of economic cycles. Long-term investments in physical assets like gold and silver have proven to be a very effective hedge against market downturns. We believe a 2:1 position of commodities to equities is appropriate to insulate a portfolio against such events and maintain that as part of policy.

The remaining equity portfolio is based on the top-quartile global equity performers, focusing our long-term vision around a sustainable mix of technology, emerging market, and commodity companies.

The past eight years have posed unique challenges; how has your strategy navigated these pain points? We see currency as an economy’s stock price. Economic events like the sovereign debt crisis in Greece and the Brexit Referendum in 2016, as well as the COVID-19 pandemic, created significant volatility. With Greece and Brexit, the events were locally focused and allowed for significant asset dislocations compared with the rest of the world.

The volatility created by COVID-19 was initially very uneven, allowing hedging strategies to thrive. Facing the worldwide outbreak, we managed our risks when all markets showed extreme conditions, and continued trading with our strategies as markets stabilized.

Your portfolio uses a real estate corporate guarantee to protect investors from significant drawdowns. Does this mean the strategy is still susceptible to periods of high stress? Downside protection is top of mind for many of our clients and, while they all understand that markets will go through periods of high stress, our objective is to give them peace of mind. Our real estate backing flows from our philosophy that these high-stress periods shouldn’t be passed on to our clients and can be mitigated by our investment strategy.

How are you positioning yourselves in 2022? Based on our previous years’ results and strategy, we’ll continue working as we have done. Needless to say, we always keep a close eye on all worldwide assets; if the markets do show the need for a change in strategy, we’ll not hesitate to do so in order to keep delivering consistent positive results for our investors.

As published on https://www.preqin.com/insights/research/blogs/stemming-crisis-through-global-diversification