City Fund Management : DXF01 Strategy

Summary

Global Macro systematic strategy. It utilises a variety of systematic models in a diversified approach that ensure minimal correlation with the market. It is focusing on medium time-frame investments so as to reduce the volatility that can be observed in longer duration strategies. It is operating in the space of liquid financial futures excluding commodities.

The track record is based on proforma results prior to Nov 2011. Its methodology was excerpted from a currently active strategy.

Investment Strategy

The system uses momentum and retracement based entry triggers to join existing trends. All trades have hard stops, trailing stops and targets. The number of parameters is kept low to avoid over-fitting. Each position is sized based on hard stops, in addition trailing stops and targets help to create a less volatile profile. All positions sizes are volatility adjusted, so in volatile markets position sizes are reduced and given wider stops and targets. There is strong risk management in that the system allows to re-enter a cycle after a losing trade but only in reduced size, this causes losses to decelerate in losing periods. The strategy is exclusively using liquid equity and financial futures. For a new financial instrument to be added to the portfolio, it is prioritized if it reduces both the average and largest drawdown. Correlation is monitored both within asset classes and with the overall portfolio.

Risk Management

The strategy has overall risk limits set at a daily and monthly level stops. The firm uses parametric VaR for risk measurement while actively monitoring intraday PL and volatility. Overall, risk is calculated on position and portfolio basis.