Summary

The trading strategy currently employed by the Firm relies exclusively on quantitative analysis and is systematic in nature. The Firm applies a price-based trend-following methodology to a dynamic universe of over 40 diverse futures markets. The trading strategy is designed to scale into positions and employs trailing stops that are adjusted according to volatility. As volatility increases, position sizes decrease and stop levels are widened. Accordingly, as volatility decreases, position sizes increase, and stop levels are tightened. An inherent feature of all sound systematic trend-following strategies is a predisposition to hold onto profitable trades while swiftly exiting losing trades. Another key component is diversification. Diversification tends to reduce short-term market noise whilst providing the opportunity to participate in most major moves. The Principals believe that the most emotionally difficult period for both managers and investors is during a drawdown. It is at these times, however, that a disciplined trading approach is most crucial. Although the timing and severity of drawdowns cannot be predicted, historical simulations provide an estimate of what to expect. Market exposure is monitored daily and dynamically adjusted in order to accommodate the maximum acceptable drawdown level. Furthermore, at the individual security level, new positions are sized according to underlying market volatility.