Our Thoughts on 2009
Following the financial crisis of 2008 that led to the deepest global recession in over sixty years, investor sentiment was highly risk averse with banks and financial institutions shoring up their capital reserves. The repercussion of this trading environment led towards a strengthening Dollar and liquidity drying up in even the most liquid markets. By the end of the first quarter of the year, the downward pressure on the Dollar began and this trend remained intact through to October as risk appetite returned. In the currency markets, EUR/USD broke the psychological 1.5000 barrier and USD/CHF traded its way down to parity once again. The Japanese Yen strengthen against the Dollar to levels last seen over 15 years ago, while a rally in the Aussie and Kiwi built up momentum against the Greenback towards all time highs.
The impact of this market environment on the Capricorn trading strategies has been positive with all programs ending up on the year. Clients in the Capricorn FXG10 Fund netted approximately 10% on the year without a single drawdown month. In the managed account strategies the Capricorn fxST (Aggressive) program grossed a return of approximately 9%, with the (Growth) program returning half that result. Bearing in mind these pure alpha returns were produced using a leverage of only 0.75 and 0.375 times respectively, with only one drawdown month.
In making comparisons to other currency programs available to professional investors, the Capricorn strategies have performed very well. The Capricorn FXG10 Fund had been nominated for a performance award by Hedge Fund Review, as a 'Best Newcomer' for 2008. Additionally, with positive risk-adjusted returns contributing to the track record throughout 2009, this produced high rankings for the program in industry databases. Since inception in April 2008, according to the Stark database, the program produced the second highest Sharpe Ratio of all currency strategies to date. In the managed account programs, the Capricorn fxST (Aggressive) program produced annualised returns of around 10% in over a decade of trading. Due to the low number of currency programs with more than 10 years trading history, the Capricorn fxST strategy was compared to all managed futures products since 1999. According to the Stark database the fxST (Aggressive) program ranked first by Sharpe Ratio, with the de-levered (Growth) program ranked second by volatility, a key risk measure.
Internal developments for Capricorn in 2009 included expanding our team and focusing our presence in Scandinavia. Klaus Oesterballe joined as Head of Global Sales with the primary role of communicating our strategies to a growing client base. With Klaus on the team we were able to dedicate more time to research new products and strengthen the Capricorn product range and risk controls. This led to hiring an external trading desk to monitor overnight positions and stoploss levels as a secondary control, introducing an institutional structure for the FXG10 Fund and developing an algorithmic trading strategy. This new product that trades currency futures and other derivatives will be launched in 2010 as a fund. Finally, in the last quarter of the year Thomas Sander joined as Director of Scandinavia, introducing Capricorn to his network of affluent Scandinavian investors. To strengthen our positioning in the region, Capricorn is now affiliated with a Danish regulated asset manager that is licensed to distribute hedge fund strategies to the Scandinavian market.
On the trade execution side we maintained the decision to have a minimum three single-bank and two multi-bank liquidity providers to trade with. With prime brokerage established with Deutsche Bank and SE Banken they remain our key liquidity providers. This proved to easily cover our liquidity needs of our 'Best Pricing' and 'Best Execution' philosophy for our currency strategies.
Historical evidence has shown that solid currency managers remain so in the future. With a strong track record of over a decade producing stable risk adjusted returns, we look forward to serving you in 2010.