In the trading business it’s important to understand who’s also involved in our markets we trade. We can take a glance at the Triennial Central Bank Survey to be more informed:

According to the 2019 survey

There are 3 main counterparties:

1. Reporting Dealers

2. Non-financial customers

3. Other financial institutions

Hedge funds will fall under the other financial institutions. Who is in the HF spotlight this week?

Aleutian Fund

The hedge fund space is an interesting one. You occasionally see funds act of subsidaries over other investment houses/funds. Aleutian fund is operated by Caygan Capital Pte. Ltd. Current AUM sits at 200.3 million. What if you wanted to work with their team?

Better have $1,000,000 ready to invest!

Performance wise their fund is performing well sitting at a compounded annual return of 10.59%

Now for the interesting details!

Methodology 

How does Aleutian view markets?

Here is the FULL breakdown, but you don’t have to read it all. I would suggest you do though. It will make you smarter!

Overall Aleutian/Caygan Capital take a fairly macro & fundamental approach to markets. Though they do outline other terminology such as convexity, volatility, market inefficiencies, mispricings and structured products.

Their edge:

Majority of what they do is focus on options and derivatives/structured products. These are more so the instruments they use to capitalize on their edge.

Their understanding of overall markets will come from macro & fundmentals, understanding the credit cycle as well as macro overlays. We can also gather some more insight researching Caygans site!

Takeaways for your own trading📈

Fundamentals & macro will always be an important source of information to help you define your edge in markets. We saw how Aleutian/Caygan talks briefly about understanding the credit cycle and being aware of where we are at in the cycle. This is something I would highly recommend studying more material on. It will be a topic we touch on too.

When you have a hedge fund like this, they tend to mention about risk and quantifying risk. Someting every trader needs to have a grasp on. How much risk do you have on? How exposed is your portfolio to specific events?

What I find important and agree with is understanding macro overlays. This doesn’t mean you need a model, it’s helpful, but being a rationale & logical thinker with economic data is a skill of professional traders. If you want to look more into macro overlays start here

Assessing economic & fundamental data can definitely be a task, to say the least. As a macro trader, you have to understand historical events/data. Not just that but also being able to take that understanding along with current macro catalysts and be able to have a forward looking view.

Now you may not have a team like Aleutian has, but using what resources you have can be impactful to your trading. Talk to other traders, follow other data sources to help you come up with a strong bias.

You don’t have to be a hedge fund to be successful but we can certainly take some pointers from them

FS