Quadron Capital Ltd

CEO of Quadron Capital Interviewed About the Future of Algorithmic Hedge Funds

‘Adapt or Die’


Hamilton, Bermuda -- (SBWIRE) -- 11/03/2014 -- CEO of Fund Advisor Quadron Capital Leroy Lawrence shares the low down on how institutional investors are maximizing their reward vs risk of investment using algorithmic trading.


Asked why investors turn to algorithmic trading Leroy responded “Initially all investors want continuous profit and restriction of potential loss or risk management. Then, understanding that risk is unavoidable they often want to hedge their investment. Whether it be in uncorrelated multiple asset classes that react differently to macro-economic changes or by that which offers diversified access to liquidity and leverage. With algorithmic trading such as ours they can attain high liquidity, market neutrality and strict risk parameters.

That is not to say that automated trading is simply better than manual trading, but as the market continues to be taken over by algorithmic trading it is clear that this type of trading is winning the war on which type of trading offers the most value for investors.

98% of the time our algorithms are watching the market, testing and attaining data. Then for the short period when conditions are suitable, they will place many trades within milliseconds and then close them again shortly after. Whilst we do use multiple algorithms that have different strategies, we are generally out of the market before big news and overnight, especially over weekends. This gives greater piece of mind to investors and reduces gap up risk when markets open.”

Interviewer Monica Gibson asked why investors often work withQuadron’s managed accounts before placing with their currency fund. He made the point that “We are very much a proof is in the pudding company and therefore our managed accounts give full transparency. It isn’t ideal for us to trade multiple smaller sub $1m managed accounts and it heavily increases our work load, but we want to prove our worth. We don’t feel that this is done by back tests or accounts but by the investor having a vested interested in what we do short term, so that they will invest with us long term. Traditionally a fund will supply an investor with historical track record and then if the returns are adequate it will go a long way to securing an investment. Our fund however uses multiple algorithms that are shown in a limited way via our managed accounts.

We want to build hands on trust with our potential fund investors by trading with real money in real time that they can value and have a stake in. We want investors to buy into us as a firm so that they can sleep soundly at night when they become our fund investors.Each managed account has varying levels of risk and can be customized suit risk requirements of a client’s overall strategy.”

Taking time to understand the potential growth in this part of asset allocation he was asked if the markets see an increase in this type of trading. The CEO stated that “So far in the overall market algorithmic trading such as high frequency trading makes up circa 50% of the market with over 60% in the US. Some experts predict that within in the next few years 80% of the financial market will be automated.

In spot FX specifically the automated activity is expected to increase to 25% by the end of 2015.Just as we do in our normal everyday lives, we turn to technology to make life more simple and rewarding. That is what we are seeing with the growth of this type of trading. Less active man hours, more research and growth.

Initially algorithmic strategies were IF/Then questions and actions based on the strategies of manual traders. Then as latency became lower and liquidity became higher we were able to create profit from more complex mathematical and systematic equations which are not offered in standard trading tools such as Bollinger bands or moving averages.

The only thing that could slow the growth of this market is a lack of confidence created by such events as the flash crash of 2010 that lasted 10 minutes.

…but there have been many more crashes attributable to manual trading long before that event and there will be in the future to come.”

Keeping to the subject of change he was asked what future changes he expects to affect this part of the currency market. CEO Leroy Lawrence firstly mentioned “Regulatory changes are where any finance professional keeps his eye. Regulators especially in Germany and India have made suggestions to prevent negative market affects being caused by high frequency trading. Two of the main suggestions have been a half a second cooling off period between trades and a licencing for high frequency trading. Ultimately no real evidence has materialized that proves high frequency trading was negatively manipulating the market and the EU law makers decided against these measures in the most recent MiFID II directives.It is the responsibility of everyone who uses the financial market to ensure there is market confidence in a fair market. This is done by playing fair.”

He then went on to make comparisons that “From the view of a manual trader who cannot execute multiple trades in milliseconds it may not feel ideal, but each method has its upside.Automated trading vs manual trading is the equivalent of Uber Taxi vs the London black cab. The black cab feels like it is a victim of an unfair advantage that the Uber taxi has by using technology, but innovation is at the heart of capitalism.”

Contact: Richard Green
Web: www.quadroncapital.com