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Interview with Grant Jaffarian, CIO of Efficient Capital Management®. Part II

HedgeFonder.nu: Without going too deeply into the investment process, what typically makes you add a new manager to the portfolios. And why, typically, would you redeem your investment?

Grant Jaffarian: Efficient has a relentless manager search process. As a team we visit typically more than 150 managers on-site in a given year. As a result, finding new talent that has the potential of capturing alpha returns is a big investment. When we add a manager it will always be a combination of both quantitative and qualitative analysis. New managers must have terrific stand-alone potential of hitting our target of a .6 Sharpe ratio over the long term. Additionally, qualitative excellence is demanded in all areas. (more…)

The Benchmark. Interview with Grant Jaffarian, CIO of Efficient Capital Management®. Part I

I am incorporating into this blog the article recently published on the financial web hedgefonder.nu. I would like to highlight the fact that  this company has collaborated with STOXX® to develop a rules based methodology to create an index that captures the returns of a Managed Futures as an asset class. We offer to the readers the point of view of leading company in Multi-Manager portfolio design and management business who provides the most relevant information on the benefits of investing in CTA funds. (more…)

The persistence of memory: from “Griots” to Numerical Libraries

A “griot” was an African historian who retained all of the events of a village in his memory: births, deaths, weddings and wars, thereby ensuring the continuation of the people’s intangible heritable.  A griot could speak for hours and even days, recounting from memory the stories handed down from generation to generation.

Fortunately, we do not need “griots” to process all of the information generated by the financial markets. With a fully developed Data Center (more…)

Trading plan IV. Generating alpha: Trading systems

“The accumulation of small advantages leads to considerable supremacy”.
(Wilhelm Steinitz, former World Chess Champion)

In this article and the next one, as we continue to examine the idea of alpha, we will take a closer look at what is known as strategic territory. Trading systems adhere to investment strategies whose mission is to analyse the information generated about the different assets and, on the basis of that analysis, decide what action should be taken: sell, buy or do nothing. In a chess game, we would use the strategies we have learned from studying the game and the practical experience acquired, combining them to corner our adversary and (more…)

Trust, Risk and Opportunity. Why Not Invest in a CTA?

Is it risky to sit that close to an elephant? Do you feel you can trust it?

It’s not a trick picture; the elephant is listening closely to the reading boy. The picture is by Gregory Colbert, a professional photographer who spent years in Asian countries taking some really incredible photographs. When we look at this picture, it’s not hard to see that risk perception is based on subjective experiences and intuitive judgments.

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Trading Plan III. Generating Alpha: Indicators

What Is Alpha?

Besides being the first letter (and partial source of the name) of the Greek alphabet, the term “alpha” is also known for its use in comparing investment funds. In this context, we can define it as the value of a given fund with respect to a benchmark fund. Alpha lets us (more…)

Correlation (I). CTAs or how to beat the monkey

Generally speaking, we’re not very good at making predictions which is perhaps why fortune tellers and others like them are so successful.  A quantitative analyst does not aspire to predict the future but rather to do something even more basic: to know whether one action is the cause of another, to study the effects behind an apparently simultaneous occurrence. Correlation is just one of the different ways of quantifying the relationship between two variables; this entry and the next one will discuss just that.

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The Father of the Nile and Futures Managers

Nile river“What distinguishes scientific research from other types of investigation is that it is guided by what is known as the scientific method, one of whose systems is empiricism, which provides us with knowledge that is gained primarily from experience. Empirical knowledge is acquired through practice and direct contact with reality and is the basis of all economies and the wealth they generate”. (more…)

Pension Fund Managers have CTAs in their Sights

I am incorporating into this blog the article recently published on the financial web Funds People. I would like to highlight the expectations we all place in our future and the different ways of dealing with them. Some hope to change and improve, others, recover the past, the traditional; We offer to the readers the most relevant information on the benefits of investing in CTA funds and invite them to do the math themselves. (more…)