Trading Involves Substantial Risk of Loss / Past Results are not necessarily Indicative of Future Results
Efficient Capital Management® specializes in liquid,
alpha-generating, multi-trader portfolios. All positions are held in listed
contracts and interbank foreign exchange, and a proprietary quantitative approach
is used to select and monitor the traders and the composite portfolios. Efficient
Capital Management® has developed tools to measure and project volatility, return, and drawdown
expectations across various time frames.
A parallel back-office updates all positions and portfolio adjustments intra-day.
Efficient Capital Management® continuously monitors traders and their positions and systematically
re-balances them for both risk and profit.
Statistically meaningful research requires the use of daily return data, and our
multiple correlation models achieve significant volatility reduction, focusing on
"stressed" global market conditions. All time-critical portfolio performance
and risk information is made available to the investor through secure website
Every effort is made to exceed the rigorous demands of the institutional investor.
On Liquidity & Cash-Efficiency:
When seeking diversification and pure trading profit
often known as alpha, institutional investors rarely distinguish
between cash-efficient, liquid investments and less transparent alternatives.
For example, Commodity Trading Advisors are often evaluated as a
hedge fund subset. To do so fails to optimize the
benefits unique to this trading methodology.
Efficient Capital Management® has, as a goal, the maximization of benefits unique to Managers that
trade listed exchange instruments and inter-bank FX. Several critical portfolio
This restriction to instruments that are both liquid and cash-efficient makes it possible
to target alpha. Also, because one can generally leverage without borrowing,
the trading portfolio has minimal currency exposure
and can be used as a volatility-reducing/yield-enhancing portfolio overlay.
- Position and risk transparency.
- Daily liquidity.
- The ability to leverage individual trading strategies up or down to optimize
- The ability to target specific investment objectives by leveraging the composite
- "Non-directional" trading that can potentially benefit regardless of market movement.
On Risk Management:
Risk management is the central focus for Efficient Capital Management®.
Risk is continuously monitored and managed on multiple levels.
First, on the individual trader level.
Second, on a portfolio level.
- A statistical profile is created on every trader that delineates
returns, drawdowns, and volatility on a daily, weekly, monthly, quarterly, semi-annual, and
annual basis. Every day, each trading account is measured at all levels against
all time-frames to verify trading discipline and consistancy with a manager's
history and style.
- For each trader, a maximum position size is determined for every market
that is traded. Accordingly, daily position reports are created and intra-day
analysis is undertaken so that positions can be monitored.
- Capital-at-risk is monitored. Also, a form of Value-at-Risk is employed to ensure that the
portfolio stays within pre-agreed risk levels.
- All standards used for the individual trader are also employed on a portfolio
- Multiple risk measurments and trading models are utilized to summarize composite
In 1983, Professor John Lintner of Harvard presented
his groundbreaking paper. He concluded in part: ". portfolios including
futures investments will provide a higher return for any given acceptable
level of risk . than can be provided by a portfolio of stocks alone (or by
any mixed portfolio restricted to stocks and bonds)."
Just as it is critical that all portfolios diversify into "futures investments,"
a well-designed and managed portfolio of traders should also maximally benefit
from diversification. To this end, Efficient Capital Management® has developed a number
of proprietary correlation models to maximize the benefit of diversification
under all historical market conditions. All analysis utilizes daily return data to
insure that there are an adequate number of data points for statistical validity.
Emphasis is placed on risk control during volatile and stressed market trading environments.
Diversification among multiple traders with measurably low correlation to each
other substantially reduces composite portfolio volatility and significantly
reduces investment risk. It also plays a significant role in allowing for a
high degree of risk predictability.