The Sharpe Signa LLC Managed Currency Series takes a true global macro approach to trading foreign exchange. Managing member and sole principal Garen Ovsepyan leads a team of traders that incorporates trend-following, neural networks, pattern recognition, statistical arbitrage, seasonality, quantitative models and fundamentals into a discretionary commodity trading advisor that has earned impressive risk-adjusted returns and has grown assets to just under $100 million in less than three years.
Ovsepyan built his team in 2009 under the name of Vanguard Axis. In 2012 he rebranded under the Sharpe Signa moniker. Sharpe earned 61.54% in 2010 after launching in June of that year, and followed up with 33.36% in 2011 and 15.49% in 2012. They did this while producing a worst drawdown of 4.12%. Despite the gaudy compound annual return (CAR) of 42.32%, Ovsepyan says strong risk management is the foundation of their strategy.
“As an FX manager we are way underleveraged,” Ovsepyan says. “In terms of managing risk, we keep it simple. A lot of times managers muddy the picture of what risk management is. We utilize hard stops, every position we take on we already know what we will be risking. If the position goes against us right off the bat we are not going to move stops back to avoid being stopped out. If we are wrong we move on to the next idea.”
The trading team takes all those varied quantitative inputs into consideration, and then applies its fundamental knowledge before pulling the trigger on short-, medium- and long-term trades on a strictly discretionary basis.
“Our neural net model tries to find patterns. Patterns can be anything from graphical, to seasonal to mathematical,” says Ovsepyan. “We utilize market intelligence that we are able to gather from our sources. A lot of mangers would disregard that type of information because they are so systematic. “
But the Sharpe team does not disregard anything or rely on one input. “We use our technical, fundamental, quantitative and market flow analysis just for that,” Ovsepyan says. “If we feel comfortable with what the quantitative model is putting out we may take the trade, sometimes fundamentals may outweigh any technical or quantitative information we are able to obtain.”
That has been important especially in the last two years when the risk-on/risk-off nature of forex markets has led to some huge whipsaws. Case in point was the Italian elections this [past] February. “The euro-yen dropped 650 ticks in less than 12 hours. We weren’t sure how the market would react to the election so we waited on the sidelines and waited to see where the dust would settle,” Ovsepyan says.
While they avoided that ugly move, their long-term strategy profited from the huge move in dollar-yen, hitting all its profit targets and they maintains a small position.
Sharpe has offices in Los Angeles, London and New Zealand. “Collectively as a team we form a cohesive unit and are able to pass the baton. It gives us 24-hour coverage that allows us to have eyes on the different markets that are present at all times,” Ovsepyan says.
Ovsepyan operates out of Las Angeles with his research team and is in charge of the long-term trading decisions. Richard Campbell and Amit Patel are in London with another research team and Richard Shennan operates out of New Zealand. Campbell and Shennan bring fundamental inputs and initiate shorter-term trades.
“It is kind of like a relay race. It starts out Sunday afternoon and we talk about what is on the table for the week. Every morning we talk before Europe opens and again before Asia opens. Every office puts out what they are looking at,” Ovsepyan says.
Ovsepyan acts as the team captain leading the meetings. “Collectively we are looking at 100 years of trading [experience] both on the buy side and sell side on an institutional basis in FX,” he says. Ovsepyan started off in the insurance industry after studying at the New York Institute of Technology and opened his own investment firm in 2002. Campbell spent 18 years at Lloyds TSB London where he headed up FX trading and Shennan worked on the FX trading desks of a large Australian bank and London prop shop. “I am more of a long return fundamental trader. Patel is more on the quantitative side of things and [Campbell and Shennan] both come from a banking background,” he says.
Ovsepyan adds, “Currencies are a truly global macro asset class because what is happening anywhere in the world on a global macro level can affect any currency that we are trading.”
Because of this they have to understand each currency on a micro and macro basis.
And it has worked out well. “If you compare us to our peers, 2010 was a great year for everyone and we still outperformed them. In 2011 everyone’s performance went down; we still outperformed everyone else. In 2012 if you compare us to larger FX managers we outperformed all but one,” Ovsepyan says.