Eleuthera Capital: How to systematically extract Alpha from FX Markets beyond long term trending or carry models

Eleuthera Capital runs the Eleuthera Currency Fund, a short-term fully automated trading strategy that primarily trades spot cash currencies of selected OECD countries. Unlike most other FX managers, Eleuthera's trading strategies do not rely on long term trending or carry trades but on systematic short term directional and mean reversion models.

With US $4 trillion per day, the currency market is the most liquid market in the world, yet investors typically have minimal allocation to currency trading. Daily FX volume is approximately 4.9x the daily turnover of the US bond market and 32x the daily turnover of the New York Stock Exchange. FX turnover has grown 20% over the last three years. Spot transactions have risen 48% over the last three years, accounting for 75% of the overall increase in turnover.

Investment returns from currency markets are typically uncorrelated to other investment strategies. Short-term systematic currency trading offers investors the opportunity to profit from volatile market conditions. However, only US $9.1bn is managed in pure foreign exchange investment funds representing less than 0.25% of daily FX turnover which allows significant opportunity for FX specialists.

Hear from Eleuthera's co-founder Philippe Bonnefoy:
* Where is the growth of the FX markets coming from?
* If currency markets are the largest financial markets, how comes there are so few currency managers?
* Why do so few currency managers achieve a consistent performance?
* What factors limit the proliferation of active currency managers?
* What type of investors are drawn to Eleuthera Currency Fund?

Eleuthera's models typically generate high returns in periods of high volatility. The majority of trading is conducted intra-day in the currency (and bullion) spot markets; however, it is not a “high frequency” trading system.

Philippe Bonnefoy has been managing money globally for over 25 years across multiple asset classes and trading strategies. He has built a number of successful businesses including the Cedar Fund and Cedar Diversified Macro Fund which were sold to Erste Bank AG in 2007 and Cedar Partners, the external investment advisor to Commerzbank for alternative investments, a platform that grew to over $2.5 billion. Prior to founding Cedar, Philippe ran a proprietary trading and advisory firm specialising in global macro trading and was previously Managing Director responsible for the international activities for a risk arbitrage firm established by former Kidder, Peabody & Co. colleagues, becoming one of the largest of its kind. Philippe began his career at Kidder, Peabody & Co. in New York as a corporate finance analyst before moving to the International Investment business in London where he managed the International Equity Portfolio for the BHP Pension Fund. In April, 2011 Philippe became Chairman & CIO of Newscape Capital Group a London-based, FSA regulated, specialist investment and advisory firm that will distribute investment products created by Eleuthera Capital AG using its UCITS fund platform.
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Eleuthera Capital runs the Eleuthera Currency Fund, a short-term fully automated trading strategy that primarily trades spot cash currencies of selected OECD countries. Unlike most other FX managers, Eleuthera's trading strategies do not rely on long term trending or carry trades but on systematic short term directional and mean reversion models.

With US $4 trillion per day, the currency market is the most liquid market in the world, yet investors typically have minimal allocation to currency trading. Daily FX volume is approximately ...more