Estlander & Partners : Global Markets

Summary

Estlander & Partners Global Markets is a highly diversified global futures trading programme that aims at producing attractive risk adjusted returns and low correlation to traditional investments. The program adopts a diversified trading approach, including strategies capturing global price trends in multiple time frames, ranging from intraday to several months. In addition systematic macro models are applied. These will hold small positions when expected return expectations are low. The diversified trading approach is combined with prudent risk management on several layers. The historical track record goes back to 1991. The information is provided on strategy level for the investment program in question. Performance figures and other information on funds applying the investment program in question are available by contacting Estlander & Partners Ltd.

Investment Strategy

Estlander & Partners Global Markets adopt a systematic trading approach to global and liquid futures and forward markets. Over 110 markets are traded in the programme, where price and fundamental information is used for decision making. The core parts of Global Markets are trend following models. Return extraction is based on behavioural biases and cyclical risk premiums as well as changes in global economies. Here, models with holding periods from a few hours up to several months are combined. In the decision making process, data from the underlying market as well as related markets is used. Positions are both long and short. Systematic Macro models take further advantage of non-price information in the decision making process. The models take advantage of global capital flows based on economic trends and extract time-varying risk premia and value opportunities. The models provide a diversifying return stream to the trend-following models. Counter-trend models models are trading on horizons ranging from a few hours to approximately 10 days. These models are a positive diversifier to the price driven trend and systematic macro models. Risk is balanced in the portfolio with Achilles risk management. It is a forward looking estimation of the worst case outcome (including correlation breakdowns) for each model.

Risk Management

Risk management is conducted on three levels:

Portfolio level
Market cluster level
Position level.

On the portfolio level, risk management controls the overall exposure of the portfolio. When predefined maximum risk levels are met, instructions to the market cluster level are sent to reduce exposure to reinstate an overall risk level. Such instructions alter the tolerance levels of the clusters. Risk Management on the cluster level has two main functions: Firstly, it balances and controls the risk level of each market cluster. Secondly, it maintains the proper balance between the clusters, which supports the overall diversification of the portfolio. All controls are made on a continuous basis, and any changes in the environment are taken into account. Risk management on position level controls the individual risk and adjusts for changes in instrument volatility to maintain a constant risk level. The target annual volatility of the strategy is 10%, which sets all individual position, cluster and portfolio VaR limits.