The strategy of risk-free arbitrage

Absolute return, low risk, high liquidity

12%

Annual return
since inception

+89%

share of months with positive results

9,2 %

Return
in 2018

2,9

Sharpe
ratio

-0,8%

Maximum
loss since inception

*the net yield after deduction of fees for management and outcome

FLAG fund was launched and started its investment activity in June 2014

About arbitration strategies

Strategy’s source of return:

The market inefficiency caused by a short-term disbalances of the asset price

Strategy working principles:

The strategy yields from the short-term market inefficiencies, when the same asset has a different price on different exchange markets for a short period of time.

In other words, the return is realized when you simultaneously buy a cheap asset on one exchange market and sell it on another at a higher price. The total return is equal to the difference in the price of two instruments at the time of the transaction less broker fees

The specificity and main advantage of the strategy are that its result does not depend on the change in the price of the asset, either up or down. Profit is fixed at the moment when prices on different exchange markets converge and the transaction becomes closed.

The market risk of arbitrage is equal to zero and is reduced only to the technical: force majeure in the software or the collapse of one of the market.

Advantages

No impact of the market dynamic

The return does not depend on the change in the price of the asset

One of the safest trading strategies

The price forecasts are not necessary

No market risk – arbitrage transaction is always market-neutral

One of the best combinations of risk and return

Using inefficiencies in prices of liquid financial instruments

Purchase of assets on the organized market immediately followed by their sale at a higher price on the other organized market

Self-developed trading systems for making deals

The best management team on the market

Over 25 years of experience of senior managers

9 people in a team

A significant proportion of the partners proprietary capital is invested in the strategy

Trustworthy providers and tight relationships with key investment institutions

Effective risk management

The risks are diversified over the assets of different classes and a number of exchange markets

Hedging of currency risks and conservative leverage degree

The position opened in another currency is automatically converted into USD in case of any negative/positive result

A short and long position opened at the same time hedges market risk

About the fund strategy

  1. Professional Management. The strategy is based on the long-term experience of Jacques Der Megreditchian and his partners Yurii Karavan and Andrey Kruptsov- professional traders, working on the Russian financial markets almost since its establishment, and actively participating in its development.
  2. Market neutrality. The strategy specializes in assets that are quoted both on Russian exchanges and on foreign ones. Due to the market neutrality of each position, the strategydoes not carry the risk associated with the Russian economic and political situation. The strategy ignores the potential growth or fall of the market.
  3. Adaptability. A strategy is a portfolio of a number of specialized sub-strategies with a changing system of limits between them depending on market conditions.
  4. High frequency. The program open up to 10,000 positions every day . Profit on each transaction is minimal, but in total the strategy delivers a high result. The risk of each transaction in the total portfolio is modest.
  5. Unique software. The strategy is implemented with the support of our own software, developed on the basis of copyright trading algorithms, crafted by decades of professional trading on different markets.

Key people

Movchan team

Jacques der Megreditchian

FOUNDER OF FLAG Quantitative Strategies Fund Ltd

Chief Business Officer of Troika Dialog from 2009 to September 2011, managing all of Troika Dialog's business units. Previously from 2007 to 2009, Mr. Der Megreditchian was Head of Global Markets and Investment Banking at Troika Dialog, and from 2000 to 2007 he was Head of Global Markets at Troika Dialog. He is a member of the Board of Directors of TCS Group Holding PLC, JSC IT Invest and National Association of Stock Market Participants (NAUFOR, from 2006), and he is also Chairman of the Moscow Exchange Council. From 1996 to 2000 Mr. Der Megreditchian was Deputy General Manager of Societe Generale in Moscow. From 1985 to 1996 he held various roles with Credit Commercial de France (CCF), including Chief Representative in Russia from 1993 to 1996. He was Chairman of the RTS Russian Stock Exchange Board of Directors from 2004 to 2011 and he was also a member of the Management Board and Co-Chair of Commission on Financial Industry of the Russian Union of Industrialists and Entrepreneurs (from 2010 to 2012). He graduated from the European Business Institute, Paris in 1984 and from the French Center for Financial Analysis, Paris in 1987.

Movchan team

Yuri Karavan

COO OF FLAG Quantitative Strategies Fund Ltd

Was a portfolio manager at Troika Dialog Asset Management from September 2010 to October 2012 where he managed funds and strategies targeting international markets, including BRIC, gold mining and global internet sectors. In 2008-2010 he was an advisor to the Chief Business Officer of Troika Dialog. In 2007-2008 he was Director in the investment banking department of Troika Dialog. Prior to Troika, he worked at Donaldson, Lufkin & Jenrette and Yahoo!. He has an MBA from the University of Chicago and a BS from SUNY at New Paltz.

Movchan team

Alexey Kruptsov

CIO OF FLAG Quantitative Strategies Fund Ltd

From January 2010 has been CEO of Znamenka Capital (formerly 7 Sigma) which trades mathematical arbitrage strategies on the Russian market. Alexey manages the investment processes of the company and heads a team of developers of software used by the company to implement its investment strategies. In 2006-2009 he was Deputy CEO and partner of a licensed broker-dealer Aquila Asset Management which he founded and which ranked in the top-50 based on trading volume in equities and futures on the Russian market. Alexey has an M.S. in Applied Mathematics and Economics from Moscow Institute of Physics and Technology.

Learn more about the fund