1. Chahine Systematic Global Macro FundBehavioral and Technical Asset Allocation Model
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3. J.CHAHINE CAPITAL GROUP - BACKGROUND ● A leader in Quantitative ‘Momentum’ based asset management ● Founded in 1998 by Jacques Chahine PhD ● Total Assets Under Management: ~ Euros 320 Million ● Management Company to SICAV Digital Funds – Luxembourg ● Manager of Digital Stars Europe (1998) & Digital Stars Europe Ex-UK (2006) ● Twice winner of Lipper best equity fund over 10 years Bloomberg ISIN Lipper Telekurs Digital Stars Europe Acc BILDSCE LX LU0090784017 60095620 949405 Digital Stars Europe Ex-UK Acc DFXUKAC LX LU0259626645 65043335 2604472
4. ASSET ALLOCATION FOR AN EVOLVING WORLDChahine Systematic Global Macro Fund : A global and flexible multi asset fundGoal: Capital appreciation and preservation.Approach: Diversified and systematic management based upon trend followingtechnical and behavioral indicators.Tool: Responsive management by daily dynamic adjustment of the exposure to thedifferent markets, depending upon the ‘Momentum’ and the global behavioral state(Market sentiment, risk aversion, excess).
5. WHY? - DIVERSIFICATION DOES NOT PROTECT AGAINST LOSS
6. ACTIVE MANAGEMENT OF EXPOSURE : OPTIMIZE THE ASSET ALLOCATION MIX Modern asset management should be responsive. Flexibility is key in today’s rapidly transforming global economy. The Behavioral and Technical Asset Allocation Model (BTAAM) daily adjusts the exposure of each asset class using futures. Once the global exposure to various risks are determined, the BTAAM chooses between the different tradable instruments for each asset class. This arbitration is based upon the market opportunities and a mean reversion process. The BTAAM shifts from technical to behavioral analysis when the market is emotionally driven. Major trend changes occur at points of wild volatility and extreme fear. In this context, technical indicators become meaningless and the only reliable type of indicator to predict a market reversal are sentiment based.
7. Technical Asset Allocation Model (TAAM) IThe TAAM adjusts progressively the exposure to the right global risks (beta) acrossasset classes depending on a ‘state matrix’ defined by Global Momentum forEquities and for Government debt : The momentum of each security is calculated based on 12 Trend following and volatility indicators with 9 differents time frames and sensitivities. The Global Momentum for each asset class is the average of its components: Technical scoring as of 30/01/2013 Debt 16.67% Equities 90.59% Gold 25.76% Commodities 86.36%
8. Technical Asset Allocation Model (TAAM) IIA global state of the market is defined by the technical scoring of global equities andLong term Government debt AAA : Global momentum Equities Global momentum Gov bonds AAA Accélération 2 1 1 : Flight to quality 2 : Inverse Flight to quality
9. Technical Asset Allocation Model (TAAM) III
10. Technical Asset Allocation Model (TAAM) IV
11. Behavioral Asset Allocation model (BAAM) IThe BAAM analyses market behavior using two different approaches : Measure of the excess in market sentiment defines a Risk on/Risk off mode : Indicator : Highly filtered Put/Call ratio When market sentiment is too high, risk is off to anticipate bull market reversal. When market sentiment is too low, risk is on to anticipate rebound after big sell off. Else the indicator is inactive. Measure of interest in the derivatives market defines a Trend following or contrarian mode : Indicator : Computed volatility of market sentiment When interest in the derivatives markets is too high, the contrarian mode is on Else the Trend following is on.
12. Behavioral and Technical Asset Allocation Model (BAAM) II
13. Behavioral and Technical Asset Allocation Model (BTAAM) IThe BTAAM is a combination of the various strategies with priority to the behavioral indicators:
14. Behavioral and Technical Asset Allocation Model (BTAAM) II
15. Behavioral and Technical Asset Allocation Model (BTAAM) III Price Base 100 for BTAAM Full history (INT) in EUR as of 28/01/1335,000 Managed account : Since Sept 2012 with Banque Degroof Luxembourg30,00025,000 Backtest : Jun 1998 - Dec 2011 Paper trading :20,000 Jan 2012 - Aug 201215,00010,000 Expected UCITS Fund : 2013 5,000 0 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 BTAAM Full history (Rebased)
16. Behavioral and Technical Asset Allocation Model (BTAAM) IV
17. Managed account I : Chahine Systematic Global Macro AccountThe BTAAM manages a wide variety of asset classes with a daily adjustment of theexposure to each security, which comprises mainly of futures and some ETFs.The universe of opportunities contains 20 liquid instruments representing all assetclasses and geographic areas: 14 stock index futures. 2 long term government bond futures. A gold index future. An investment grade Index and a High yield bond index ETFs. A commodities future. MATC Systematic Global MacroConstraints: Min Exposure Max Exposure Stocks indexes futures -30% 90% Sovereign Debt AAA 0% 90% Debt Investment Grade 0% 10% Debt High Yield 0% 10% Gold 0% 10% CRB 0% 10% Sum of the exposures 0% 120%
18. Managed Account II : Historical Asset Class Allocation
19. Managed Account III : Performance
20. Managed Account IV: Performance AttributionActive asset invested since 05/09/2012 : 400 000€Initial leverage : 5Theoretical AUM of 2 M€ (1.6 M€ not invested)Subscription of 177 700€ the 21/01/2012.Actual leverage : 3.9329/01/13 Residu : Calcul Theoretical Theoretical Theoretical Transaction Market Allocation Currencies Approximation Real Valuation +fees +/- Value Asset Valuation +/- value fees impact adjustment impact & Time Exec Valuation & mkt impact DeviationSince Inception 2,193,733 198,817 -10,104 -12,345 2,176,368 -2,332 -31,133 5,852 148,754 2,856,647 726,39105/09/2012 Hedged Partially Hedged Performance Theoretical Performance + Performance + Leverage net Leveraged Performance fees & mkt fees & mkt since inception impact impact 9.7% 8.8% 7.3% 3.93 36.4% The valuation and the account transactions are recorded by Banque Degroof Luxembourg and available on demand.
21. Backtest I : Chahine Systematic Global MacroThe extensive research involved a back-testing of 14 years.The universe of opportunities contained 21 liquid instruments representing all assetclasses and geographic areas: 15 stock index futures. 2 long term government bond futures. A gold index future. An investment grade Index and a High yield bond index ETFs. A commodities future.Constraints: MATC Systematic Global Macro Min Exposure Max Exposure Stocks indexes futures -30% 90% Sovereign Debt AAA 0% 90% Debt Investment Grade 0% 40% Debt High Yield 0% 40% Gold 0% 10% CRB 0% 10% Sum of the exposures 0% 120%
22. BACKTEST II : Historical Asset Class Allocation
24. BACKTEST IV : Statistical Analysis BTAAM Systematic US 10 YR S&P 500 Global Gov Bonds Macro Correlation Matrix Return S&P 500 US 10 YR BTAAMCompound Annual Return 35.4% 1.0% 4.8% S&P 500 100.0% -28.6% 5.0%Average Monthly Return 2.6% 0.2% 0.4% US 10 YR -28.6% 100.0% 9.7%Largest Monthly Gain 24.5% 10.8% 9.1% BTAAM 5.0% 9.7% 100.0%Largest Monthly Loss (4.9%) (16.9%) (5.8%)% Positive Months 77% 56% 61%Average Positive Return 3.9% 3.5% 1.5%Average Negative Return (1.7%) (4.0%) (1.4%) Comparison To Benchmarks% Negative Months 23% 44% 39% S&P 500 US 10 YRWorst 12 Months 9.0% (44.8%) (10.1%) Alpha 2.63% 2.55%Best 12 Months 144.7% 50.3% 17.8% Beta 0.04 0.21 Risk Correlation 0.05 0.10Annualized Standard dev. 13.95% 16.64% 6.53% R-Squared 0.00 0.01Sharpe Ratio (0,0%) 2.27 0.14 0.75 Outperformance w/Benchmark is Positive 54.3% 50.0%Sortino Ratio (0,0%) 8.78 0.08 1.23 Outperformance w/Benchmark isDownside Deviation (0,0%) 3.50% 12.19% 3.82% Negative 93.2% 87.7%Max Drawdown (11.4%) (52.6%) (12.1%)Months in Max Drawdown 3 16 16Months To Recover 2 u/w 18
25. SUMMARYThe Behavioral and Technical Asset Allocation Model A combination of two complementary approaches: The technical and the behavioral analysis. A multi-strategy model, with flexibility to adapt to different market environments over time, increasing efficiency and robustness. A robust systematic and quantitative system, investing in the most liquid instruments across all asset classes and geographic areas. Absolute return performance, uncorrelated in the long term to traditional asset classes.
26. THE OPPORTUNITY TO INVEST Chahine Systematic Global Macro - UCITS IV Fund Larger universe of opportunities For greater diversification, the BTAAM will arbiter across at least 40 liquid instruments representing all asset classes and geographic areas. Fund to be launched Mid-June 2013 Annual management fee : 2%. Out-performance fee above Eonia +3% : 20%, with High Water Mark. Seed capital objective : 100M€ Exceptional long-term incentives for initial investors.