lisbon, november 17th 2010. “the black swan markets conference” pestana palace
TRANSCRIPT
Lisbon, November 17th 2010.
“The Black Swan Markets Conference”
Pestana Palace
Company’s Key Facts.Asset Management Theory.Portuguese Asset Management: Theory in
Practice?
Presentation Overview
PA Gestão de Patrimónios SA (Asset Management)- Based in the city of Porto- Regulated by Banco de Portugal (Licence number 223)- Regulated by CMVM (Licence number 273)
Company Financials (as of September 30th 2010): - Shareholders’ Equity = 6.2 Million Euros- Debt-to-Equity Ratio = 2 %
Major shareholders: PA SGPS SA (owns 51%), which in turn is 76% owned by Mr. Pedro Arroja.
PA’s Corporate Structure
Pedro Arroja, Founder and Chief Research Officer; PhD in Economics, Carleton University (Canada).
Ricardo Arroja, Investment Officer; B.S. in Business Administration, Universidade do Porto.
Fátima Pereira, Compliance Officer; B.S. in Law, Universidade Lusíada.
PA’s Key People
Goal?Which Assets?Which Mix of Assets?
Asset Management: Theory
Goal?
Long term, inflation adjusted, preservation and accumulation of wealth.
Asset Management: Theory
Asset Management: Inflation
Which Assets?
Traditional Assets: Equities, Long and Short Term Sovereign Debt;
Alternative Assets: Real Assets (Real Estate and Commodities), Managed Accounts (or Hedge Funds) and Private Equity.
Asset Management: Theory
Asset Management: Equities
Asset Management: LT Sov Debt
Asset Management: ST Sov Debt
Long term Inflation rates are proxies for Real Estate’s and Commodity’s Compound Annual Growth Rates.
Asset Management: Real Assets
Source: Dimson, Elroy and Staunton, ABN Amro/LBS
Which Mix of Assets?
Asset Management: Theory
Typical Asset Mix in Portugal;Asset Management Companies: Typical Business Plan; Alternative Business Plan.
Asset Management: Portugal
Typical Asset Mix in Portugal
Banks’ Private banking divisions and “Gestoras de Patrimónios” (Asset Management companies);
Typical Business Plan: Overall, portfolios are highly geared towards low risk/low return traditional asset classes.
Typical Business Plan
PA Gestão de Patrimónios SA:
Alternative Business Plan: Overall, portfolios are geared towards the Yale’s asset class diversification model, with a special emphasis on Managed Accounts and actively managed Long and Short trading strategies.
Alternative Business Plan
Quantitatively Driven: Trading models are based on Statistics and Econometric algorithms (but NOT High Frequency Trading);
PA’s Core Trading Theme: Most short term market fluctuations are mean-reverting;
PA’s Main Trading Instruments: Equity Index Futures, Bond Futures, Commodity Futures and FX Futures.
PA: Managed Accounts and Trading Philosophy
Market: S&P500. Inputs: Daily Highs and Lows; Nature: Counter-trend; Buy/Sell Signals: Four day periods, including one
price expansion and three price contractions; Specific Features: “Slow and Steady”, High
Probability, Low Turnover model, currently still being back-tested.
Price expansion/contraction (Model 3AB)
“Back Testing”
“Back Testing”
Market: Dow Jones Industrials Average’s (individual stock components).
Inputs: Daily Highs and Lows; Nature: Counter-trend; Buy/Sell Signals: Two day periods, including two
price contractions; Specific Features: “Slow and Steady”, High
Probability, Low Turnover model.
Price expansion/contraction (Model AA)
“Back Testing”
“Back Testing”
Market: Nasdaq-100. Inputs: Daily % Change; Nature: Counter-trend; Buy/Sell Signals: Weekly deviations to the mean; Specific Features: “Fast and Furious”,
HighTurnover, Low Probability model
Price expansion/contraction (Model SJ)
“Back Testing”
“Back Testing”
Market: S&P500. Inputs: US Economic Data; Nature: Trend Following (*); Buy/Sell Signals: Economic Estimates versus
Actual Data; Specific Features: “Fast and Furious”, High
Turnover, Low Probability model.
Macro Model
“Back Testing”
“Back Testing”
Position Sizing and Recommended Leverage:
1) Model’s t-stat or;
2) Trading Instrument’s Confidence Intervals at the 99% confidence level.
Risk Management
We believe that in the long run investors benefit by adopting a more diversified (out-of-bonds) portfolio, subject to proper due diligence.
We know that statiscally driven trading models can be successfull if given the time to consistently implement a well tested method.
Conclusions
Thank you very much for your time!
Contacts
Avenida de Montevideu, 282, 4150-516 Porto.
Phone: (+351) 226165220
Fax: (+351) 226165229
Webpage: www.pedroarroja.com
Email: [email protected]