Short-term bond investment strategy
Flagship strategy of Movchan’s Group
7,3%
average annual return for
the period of management
1,3
Sharpe
ratio
5,6%
annual
average volatility
1
negative annual return
for 15 years
(-5,5% in 2008)
~20%
share of managers
proprietary capital
in the fund
*Data 2005-2020
Strategy History
The investment management strategy, aimed at obtaining a stable conservative income, was being developed for many years for proprietary needs. The manager and his team were investing own funds without creating an investment product.
The amounts, invested by managers, varied from USD 3 mln in 2003 to USD 30 mln in 2014–2015. During 15 years of existence, the strategy has demonstrated its reliability and the managers obtained a unique experience while working on the markets in close contacts with other managers, brokers, bankers, and combining their asset management activities with investment banking operations and management of financial institutions.
From April 2016, this strategy is offered to customers in the form of "ARGO SP" (segregated portfolio or fund). Managers also offer a replication of the strategy in client’s accounts for balances larger than USD 5 mln.
*net return before deducting management and performance fees
*strategy results 2005-2016 are not audited whereas the fund results are audited
Conservative dollar investments in global markets
The perfect solution for conservative investors
- The portfolio invested in short-term liquid debt securities
- High diversification: 20–40 issuers, 15–30 countries, 3-4 global regions
- 100% protection from currency risk
- Decision-making regarding securities is based on a thorough analysis of each issuer
Better than a deposit in a reliable bank - more profitable, more liquid, safer
- High liquidity – monthly subscriptions and redemptions
- Risk diversification among dozens of issuers
- Historical profitability is much higher than respective deposit rates
- The tax regime optimal for different clients’ groups
Crisis-proof and interest rate growth protection
- Market volatility is offset by the low duration of instruments
- Short term securities are not sensitive to the growth of interest rates
- Regional risks are compensated by high diversification
- The issuers’ risk is mitigated by a detailed analysis of each security
Reliable infrastructure
- Investment fund structure, client rights’ protection guaranteed by independent providers
- Largest global administrator (APEX) and one of the best prime brokers in the world (UBS)
- Independent administration, NAV calculation, and annual audit
- External management services offered for clients’ accounts (from $5mln.) at a platform as per clients’ choice
Professional fund management
- Partners have a track record of over 30 years
- The strategy has been managed and tracked for more than 15 years showing stable results
- Skin in the game: managers have significant proprietary capital invested in the strategy
- Management fees are significantly lower than the market averages
The main parameters of the strategy
Investment approach
Macroeconomic analysis and analysis of the issuer's creditworthiness
Markets
No industrial or geographical restrictions
Liquidity
Monthly, no limitations and commissions
Target return
US dollar inflation+ 3-5%
Basic portfolio
Predominantly: short- and medium-term bonds, issued by borrowers of acceptable quality; complimentary: third party credit instruments, funds, options (on bond ETFs and currencies), arbitrage positions
Investment process
BASIC INVESTMENT CRITERIA
Debt instruments
- Assurance of the issuers’ ability and, more importantly, eagerness to repay at maturity;
- Low systemic risk. Existence of positive systemic factors (even better — those underestimated by the market due to political or liquidity issues) is preferable;
- Yield to maturity is above the general yield curve for the instruments of the same implied risk, providing for an increased probability of the price growth;
- Limited duration of the instrument allowing for limitation of volatility of the portfolio;
- Existence of known information or access asymmetry, generating an attractive price for the instrument;
- Absence of obvious signs of the over-heating of the markets on the whole and material probability of its systematic correction;
- Size limitation, not more than 4-5% of the portfolio per instrument as a rule.
Other instruments
- Third-party credit instruments:
- In-depth analysis of the credit component of the product as a whole and analysis of the instruments within its structure, over a considerable time horizon;
- Inclusion of similar assets, with an additional target return of 6-8%, that are not traded, to increase the stability of the portfolio;
- The share of exposure per instrument may not exceed 5% of the net asset value of the portfolio.
- Selling put options on bond ETFs, currencies, and other instruments with below-market strike prices:
- The asset is seen as suitable for the portfolio, but the asset is overpriced. If delivered, the asset will be included into the portfolio at a price below the fair value;
- If the price of the asset does not decrease, then the option premium should deliver a target return of 5% or more;
- The share of exposure per instrument may not exceed 5% of the net asset value of the portfolio.
- Distributing-type debt ETFs:
- Inclusion into the portfolio of ETFs (with the limit of 5% of the net asset value) with strategies similar to that of ARGO SP that deliver additional return in the form of dividends.
Portfolio manager
Alexander Ovchinnikov
One of the recognized Russian experts with more than 30 years of experience in the financial markets. Since 1993, within the Central Bank of Russia Alexander participated in the creation and development of the Russian sovereign debt market. Then he headed the debt market analysis team of Troika Dialog. Since 2000, he headed the analytical, and trade divisions, was engaged in asset management in the largest Russian and international banks. In 2008 he rejoined Troika Dialog (after 2012 known as Sberbank-CIB). As a Vice-President, he led a project to modernize the Russian debt market. He has a degree of the Financial Academy in international economic relations, a diploma from the Moscow Aviation Institute, diplomas from FRB NY and Carnegie Mellon University.