MMC Capital P/L : Investment Program

Summary

-Mark McCabe is the Principal of MMC. Mark has over 20 years experience in institutional global banking. Most recently, he managed the largest risk portfolio within the JP Morgan Chase Commodity Risk Management Group, a globally-based group within the Bank, with headquarters in New York. Since then, Mark has focused his efforts on the development of his business within the hedge funds industry. MMC is supported by a team that provide research and development, programming, trading, execution, administration and marketing expertise. Their profiles are detailed in the MMC AIMA Due Diligence Questionnaire. Investment Methodology MMC engages a short term, systematic, statistically validated approach in its investment program. Underlying this approach is an intuitive understanding of market behavior over many years. Research shows that financial and commodity markets display non-random price behavior with regard to the size of price movements, that is, volatility. Our edge lies in the ability to extract this identifiable alpha via the employment of a systematic and rigidly disciplined risk management model to our investment process. The approach is applied across a broad range of market complexes. This allows for diversification across asset classes and reduces exposure to any single complex. The program has yielded positive returns in trend-less markets as it has the ability to participate in sentiment reversals that have generally been shown to impact negatively on medium and long- term managers. The benefit of inclusion of a diverse range of market complexes has been exhibited in actual investment returns given the very recent outlier volatility in commodity markets, in particular, precious and base metals. The investment approach with respect to entry, exit and risk management is consistent across all markets. That is, the exact same parameters used in one market, is used across all markets. This ensures trading success is not due to any form of optimization. The MMC approach differentiates itself from its peers in its approach to volatility. Typically, most volatility, momentum driven breakout strategies employ volatility-adaptive algorithms across the open to close risk process. This is not our approach. At the 'core' of our program lie volatility-adaptive algorithms. These algorithms apply to all entries and a percentage of exit trades. Research over years of daily and intra-day data streams, as well as actual trading performance, empirically demonstrate that the time lag exhibited in pure volatility-based algorithms applied to trade exit, does not allow for a consistent application of the risk process across the entire portfolio. Hence, the identifiable alpha cannot be extracted via a consistently applied risk process in pure volatility-based programs. Investment Program The momentum-based strategy employs a systematic approach, thereby removing inevitable non-statistical biases as a result of human emotion. The program invests across 6 market complexes, incorporating 17 markets. All are traded on U.S. based exchanges. Within each complex, we focus on liquidity in the process of alpha extraction and capacity management. In order to balance draw down against targeted returns across the portfolio, the same 0.07% risk per trade is applied. Full directional trades are allocated 0.14% risk. This low risk allocation is key to maintaining robustness in the risk-adjusted returns of the program. The investment process incorporates 3 modules that deal with entry, exit and risk management. Within this overall process are 6 filters that dynamically work together and effectively operate as the portfolio manager of the program. The entry algorithms determine how much to trade, when to trade and when not to trade. Each trade is assigned a pre-determined stop loss and profit targets. The strategy has a gain-to-loss ratio of approximately 4:1. Look back period is 4 to 7 days. In addition to pre-determined profit targets, the program also employs an SAR (stop and reverse) algorithm, which is dynamically calculated on a daily basis. Another algorithm allows counter trend risk execution in the investment process. This is important in the mitigation of slippage given the short-term nature of the program and allows greater investment capacity to the program.