Eligible investors can view the full range of Trium strategies, including those referenced below, here.

Misunderstood Asia  

Angus Chiang, Asia (ex-Japan) equity long/short portfolio manager

Misconceptions and misplaced expectations have created a rich environment for alpha capture in Asia. No longer the world's factory, innovation is transforming and redefining the region, with many of its economies rapidly developing sustainable domestic industries and strong intellectual properties. A concentrated long/short approach can capture mis-pricings when shifting investor perceptions fail to keep pace with the region's complex and fast-changing landscape.  

Moreover, fluctuating Asian market cycles can be difficult for investors to navigate, allowing a catalyst-driven approach to further unearth pockets of alpha. This opportunity is heightened as the region undergoes a period of elevated volatility and faces numerous headwinds.

Rise of the machines 

Oliver Dobbs, (CIO Credere Capital) relative value arbitrage portfolio manager  

Accelerating the trend of rising dislocations in the market is the rise of machines across the broader financial industry, which is creating fresh inefficiencies within bank securities and other assets. Across the globe's trading floors, traders have given way to algorithms. My belief is the next time we get a volatility event, it will be a lot worse than the recent spike, because there will be no one to step in on the other side of the trade.  

From quant programmes replacing humans, to firms trading on outdated or incomplete datasets, these disruptive trends are rapidly creating the potential for steeper sell-offs, but also arbitrage opportunities. In the current environment, relative-value arbitrage strategies are a true uncorrelated solution that offers both stable returns and reduced volatility. When investors are moving with the tide, relative arbitrage offers a universe of uncrowded trades through a strategy that is extremely difficult to replicate and inaccessible to big data and quant funds. 

Oliver's profile can be viewed here.

Death of a bull  

Adrien Szappanyos, top-down equity long/short portfolio manager

2018 signalled the end of the decade-long bull run. This has created a wave of disruption for long-only strategies, which enjoyed a directional market, and ushered in a new era of elevated volatility. It also brings more trading opportunities for contrarian investors using long/short strategies to generate outperformance in more turbulent market conditions.  

Focusing on US and Europe and utilising ETFs and sector swaps to minimise idiosyncratic stock risk, the portfolio is designed to outperform during more volatile periods. Market timing with technical analysis and active management of net exposure are key alpha generators within this strategy, which result in low correlation to equity markets.

Capitalising on emerging market ruptures  

Thomas Roderick, emerging markets-focused global macro portfolio manager

The ruptures in EMs last year led to large distortions, creating opportunities for those able to exploit them. By taking a contrarian stance, last year's losers can be this year's winners.  For example, the Turkish lira had an awful 2018, selling off 40% versus the US dollar from the start of the year to the end of August. Towards the end of the year, it recovered, but still finished 28% down. Part of the reason the lira started to recover was very high interest rates on offer, after the central hiked rates in response to the selloff. In the FX market, there is currently a return of 18% per year for holding the lira against the US dollar. 

This carry looks attractive, yet there is potentially further risk on the horizon for Turkey in 2019, given the erratic behaviour of President Erdogan and Syrian border concerns. An option position makes sense in this high reward/high risk scenario, limiting downside for an upfront cost. At first glance, options look expensive, with a 1y at the money volatility at 18%, much higher than in other currencies. Yet if the Turkish lira is at the same level today as it was a year ago, a put struck at the forward level would return 2.5x its initial cost. The reward to risk of being long the lira through options looks a sensible trade for 2019. 

Thomas's profile can be viewed here.



These comments featured in Investment Europe. The full article can be viewed here.


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