Jamali had seen several very successful floor traders fail in their attempt to manage money and knew he had to build a team with expertise in all aspects of a trading business. He surrounded himself with people whose skills complemented his own. He credits most of Auctos’ success to his research staff and system developers — Kim Ferizi, Ronald Nussbaum, Ali Neyestani and Abdol Esfahanian, Ph. D., who is the associate chair of the computer science department at Michigan State University.
Additionally, he recognized his need for partners with business experience. "I knew I didn’t have the expertise of running a business, but John Ruth (retired managing director and partner of Spear, Leeds & Kellogg) and the other senior management partners did," Jamali says.
Auctos, a deliberate misspelling of the Latin word "auctus," which means persistent growth, was launched in 2007, although Jamali and his team had been conducting research since 2006 (It was misspelled to avoid confusion with a German fund named Auctus). It launched with two long-term trend-following systems. In June 2009, Auctos incorporated pattern recognition and calendar spreads.
"Research is the key to what we do," Jamali says. "We always are looking for ways to improve our risk-adjusted returns."
Because the three strategies are uncorrelated themselves, they act as a second-tier defense against markets suddenly becoming correlated.
"While returns are important, our main focus is risk-adjusted returns; what is our maximum risk. Our systems project a maximum peak to valley drawdown of 15%," Jamali says. "The second thing is volatility. If you look at our returns since June 2009, you will see a much smoother return profile."
Auctos gives equal weighting to the three strategies and currently trades 40 futures markets and 30 spreads. With an average to margin equity ratio of 8%, Auctos has a solid risk/return ratio. It has seen persistent growth with total returns since inception of 45.44% and has had a return of 28.96% in the last 24 months. Currently, Auctos has $30 million under management.
Jamali has plans to further diversify Auctos’ trading, with the research team currently working to add intermarket spreads as a fourth trading strategy.
Jamali learned two valuable lessons watching his father during the 1987 crash: Know yourself, and know your risks. He has surrounded himself with a team that complements his strengths and is dedicated to researching ways to limit risk. With those attributes, Auctos may be an emerging CTA now, but it definitely has room to grow.