Alturas Capital Management (ACM) is the quintessential alternative investment vehicle, generating consistent, positive returns that are uncorrelated with traditional asset classes as well as other alternative investment indexes. Historically, an investment in ACM would have increased the risk-adjusted returns of most traditionally structured portfolios. ACM offers two avenues through which one can participate in the strategy; the Alturas Capital Castle Fund (ACCF), a commodity pool or the Alturas Capital Managed Accounts Program. Both programs are open to Qualified Eligible Person's (QEP's) as outlined under Rule 4.7 of the Commodity and Exchange Act only.
Trading
Investment is driven by a proprietary algorithm that utilizes price, volume, and market internals to forecast the one-day change in the S&P %00 Index. The strategy, which was initially developed in 2005 for a large family office, has been implemented by ACM since June, 2010. Each trading day at the stock market close (4 PM Eastern), the algorithm generates a signal between +/-100%, indicating the direction and magnitude of the forecast for the following trading day. The system expresses this signal by establishing a position in the S&P E-Mini futures. On the next trading day the process repeats, generating a new signal and adjusting the position accordingly. All forecasting and trading is automated.
Approximately 50% of trading days result in a signal that is exactly 0%, indicating there is not enough information to establish a position; on these days, the account maintains a cash balance only. 35% of the trading days are long (positive signal); 15% of trading days are short (negative signal). Historically, 58% of trades are profitable and the magnitude of the profitable trade is greater than that of the unprofitable ones. This results in 66% on the months and 100% of the years being profitable.
Risk Controls
Risk controls are embedded in the very design of our strategy; the holding period for every trade is one day, meaning every trade is terminated at the close of the trading day for which a signal was generated. Since the algorithm generates a signal of exactly 0% on half of the trading days, ACM has no market exposure 50% of the days in which the market is open. All accounts are rebalanced daily, ensuring that the stated maximum leverage of 1.75 x NAV is never exceeded. In addition to these internal measures, protective stop orders are placed on every trade and all forecasting and trading is automated.
Capacity
The S&P E-Mini futures contract is the most liquid equity instrument on the planet, with an average daily dollar volume of well over $100 billion. Furthermore, the algorithm trades at the most liquid time of day, between 4:00PM-4:01 PM, during which approximately $1.5 billion trades. If we extend the execution window to 4:00 PM-4:15 PM, the average dollar volume grows to $5 billion. Given these characteristics, we believe the strategy's realistic capacity is in the $100's of millions. If we begin to observe negative market impact, we could also trade a variety of other liquid instruments that are hignly correlated with the S&P 500 Index (e.g. SPY, futures & ETFs on other U.S. Equity Indexes, options). This could double again our stated capacity.
Tax Advantage
Under U.S. tax law, the S&P E-Mini futures contract is considered a 1256 Contract and, therefore, qualifies for the blended tax rate of 60% long-term/40% short-term capital gains regardless of the holding period.
Liquidity
The short duration of our holding period and the liquidity of our market combine to allow us to offer the attractive redemption requirement of only 30 days' notice.
Performance History
Over the 48-month period since inception, Alturas has returned 58%, with an average annualized return of 12% and an Information ratio of 0.86. Our correlation with the S&P 500 has been 0.02.
Including hypothetical results sine 1998, the strategy has annualized at 20.1% with an Information Ratio of 1,25 and correlation with the S&P 500 of 0.11.
Performance and metrics are reported net of all fees, including 1% Management/20% Incentive.
Trading
Investment is driven by a proprietary algorithm that utilizes price, volume, and market internals to forecast the one-day change in the S&P %00 Index. The strategy, which was initially developed in 2005 for a large family office, has been implemented by ACM since June, 2010. Each trading day at the stock market close (4 PM Eastern), the algorithm generates a signal between +/-100%, indicating the direction and magnitude of the forecast for the following trading day. The system expresses this signal by establishing a position in the S&P E-Mini futures. On the next trading day the process repeats, generating a new signal and adjusting the position accordingly. All forecasting and trading is automated.
Approximately 50% of trading days result in a signal that is exactly 0%, indicating there is not enough information to establish a position; on these days, the account maintains a cash balance only. 35% of the trading days are long (positive signal); 15% of trading days are short (negative signal). Historically, 58% of trades are profitable and the magnitude of the profitable trade is greater than that of the unprofitable ones. This results in 66% on the months and 100% of the years being profitable.
Risk Controls
Risk controls are embedded in the very design of our strategy; the holding period for every trade is one day, meaning every trade is terminated at the close of the trading day for which a signal was generated. Since the algorithm generates a signal of exactly 0% on half of the trading days, ACM has no market exposure 50% of the days in which the market is open. All accounts are rebalanced daily, ensuring that the stated maximum leverage of 1.75 x NAV is never exceeded. In addition to these internal measures, protective stop orders are placed on every trade and all forecasting and trading is automated.
Capacity
The S&P E-Mini futures contract is the most liquid equity instrument on the planet, with an average daily dollar volume of well over $100 billion. Furthermore, the algorithm trades at the most liquid time of day, between 4:00PM-4:01 PM, during which approximately $1.5 billion trades. If we extend the execution window to 4:00 PM-4:15 PM, the average dollar volume grows to $5 billion. Given these characteristics, we believe the strategy's realistic capacity is in the $100's of millions. If we begin to observe negative market impact, we could also trade a variety of other liquid instruments that are hignly correlated with the S&P 500 Index (e.g. SPY, futures & ETFs on other U.S. Equity Indexes, options). This could double again our stated capacity.
Tax Advantage
Under U.S. tax law, the S&P E-Mini futures contract is considered a 1256 Contract and, therefore, qualifies for the blended tax rate of 60% long-term/40% short-term capital gains regardless of the holding period.
Liquidity
The short duration of our holding period and the liquidity of our market combine to allow us to offer the attractive redemption requirement of only 30 days' notice.
Performance History
Over the 48-month period since inception, Alturas has returned 58%, with an average annualized return of 12% and an Information ratio of 0.86. Our correlation with the S&P 500 has been 0.02.
Including hypothetical results sine 1998, the strategy has annualized at 20.1% with an Information Ratio of 1,25 and correlation with the S&P 500 of 0.11.
Performance and metrics are reported net of all fees, including 1% Management/20% Incentive.