Certeza Asset Management : Macro Vega

Summary

Macro Vega is a niche program focused exclusively on volatility futures. This unique niche has virtues present in no other asset class that make it an ideal component of any broader portfolio seeking non-correlated alpha generation; it provides consistent returns as well as crisis alpha. Macro Vega is designed to be levered to the risk tolerance of the individual. On a non-levered basis, target returns are moderate with very low relative drawdowns, resulting in a favorable risk profile. Those with higher tolerance, or who wish to more efficiently utilize capital, may lever the program up to 3X with a corresponding increase in return.

Investment Strategy

Macro Vega is a futures spread trading statistical arbitrage program utilizing a systematic proprietary software to locate pricing inefficiencies in the volatility futures term structure. Virtues unique to the volatility asset class allow consistent generation of returns through both long and short volatility trades while maintaining a long volatility bias to avoid exposure to a market crisis. The program is designed to realize higher returns during periods of increased market turmoil while avoiding the monthly bleed of typical crisis alpha programs.

Risk Management

Certeza's proprietary expectancy based risk algorithms lie at the core of the risk management strategy. These algorithms utilize historical data but also include pricing events that are statistically possible despite not having occurred historically. Based around a proprietary "drawdown at risk", the program seeks to limit max allowable drawdown to 7% to a 99% level of confidence, without needing to rely on unreliable stop loss orders that would be vulnerable to crisis events. Additionally, volatility futures have no left tail. This allows the program to increase the size of trades with no tail risk while dramatically decreasing those with crash exposure. During a significant adverse move, the system scales out of open trades gradually and it is anticipated that once the max drawdown level is reached, the account would be nearing 100% allocation to cash with no remaining open positions.