BT Investment Management (BTIM) has recruited from a US hedge fund as it builds an equity long/short model in its global macro program.
Jason Petras joined BTIM from the San Francisco office of Bay Hill Capital Management, a hedge fund, and begun developing a model aiming to buy long and sell short equity index futures from around the world for the manager’s quantitative global macro program.
BTIM’s head of macro strategies, Joe Bracken, said the new model would be run alongside the two existing equity strategies – fundamental and technical – in BTIM’s global macro program “as long as it is uncorrelated with what we have, and it needs to show that it adds value over time”.
The fundamental model, which identifies stocks displaying growth, value and momentum characteristics, and the technical or “regime-switching” model, which aims to determine whether markets are trending up or down, tend to “act in concert,” Bracken said. The macro team usually ran long/short strategies in its equity, bond and currency portfolios “because we can’t control market risk,” he added.
The team leverages its bond and currency investments in a ‘risk-parity’ approach to investing so that it maintained volatility measures of 8 per cent in its bond, equity and currency strategies, resulting in an overall portfolio volatility of between 4–5 per cent, Bracken said. The portfolio is split evenly among these equity, bond and currency allocations.
He expected the new equity model to be running in the next three months. Petras’ appointment was the latest made by the macro team since it appointed Russell Investments’ former head of investment solutions, Martyn Wild, in July.
The macro fund, which manages $26 million, returned 6.75 per cent in the past year against the 4.21 per cent gained by its cash benchmark, and 1.59 per cent against the benchmark’s 4.5 per cent since its August 2008 inception. The team also runs currency overlays for $1.8 billion in assets, and a bond portfolio of $90 million, Bracken added.