Somers Brothers Capital : Diversified Futures Program #1

Summary

-The Diversified Futures Program #1 employs a proprietary model to identify trends in roughly 40 financial and commodity futures markets. Market entry and exit signals are generated by the model based on analysis of daily market data. Somers Brothers uses proprietary, multivariate statistical algorithms to distinguish market trends from short-term noise. The system uses its trend identification filters to generate market entry and exit signals and to determine optimal allocation of capital to each trade. Somers Brothers Capital believes there is a substantial benefit in adhering to a disciplined, systematic approach to trading. We also constantly seek to improve fund performance through exhaustive research and testing. Somers Brothers Capital believes that the cornerstone to a successful trading approach is the proper management of risk. We control risk at each step of the investment process, from establishing maximum adverse excursion at the time of entry into markets to limiting allocations on a relative basis at both the sector and individual position level.

Investment Strategy

At Somers Brothers Capital, we believe in a strictly systematic approach to trading. Our investment decisions are based on the disciplined application of computerized algorithms that process market data daily. This is rooted in our belief that non-systematic investment approaches are susceptible to emotional biases. Many money management professionals’ investment decisions are centered on predictions of future prices. These predictions, while often driven by sound research and logical judgments, can become a source of bias as the manager seeks validation of their prediction in the face of changing circumstances. This can lead to poor trading decisions, whether staying with market positions while losses mount or liquidating winning positions prematurely. At Somers Brothers Capital, decisions to enter and exit markets are driven by a mathematical model, without qualitative input from individuals. Our approach is designed to achieve long-term capital appreciation by systematically exploiting price trends among a diverse portfolio of futures markets. Long and short positions are established to benefit in both rising and declining markets. Profitable positions are maintained as long as the model determines the trend remains favorable.

Risk Management

Somers Brothers Capital believes that the cornerstone to a successful trading program is the proper management of risk. Our primary focus is on potential losses, not gains. Our methodology is based on the premise that successful identification of a trending market has the ability to generate enough very large gains to overwhelm a number of small losses. Our risk management strategy seeks to limit risk on a relative basis at both sector and individual position levels as soon as a trade is initiated. We diversify our positions using an array of approximately forty global markets in commodities, currencies and financial futures. We constantly monitor the amount of open risk in the portfolio and proactively adjust allocation when predetermined risk tolerances are exceeded.