8 Aug 2011 Bloomberg
All of the futures indices ahead of the open are down.
Jim Rogers -- "There are plenty of reasons for the market to go down, nothing to do with S&P. If it does turn out into a selling climax I will cover some of my shorts or all of them because that sort of action usually leads to a reversal at some point".
Peter Fisher of BlackRock -- "The S&P rating change is a wake up call about the level of risk. But the fiscal outlook of the US has been known for some time. S&P opinion doesn't change the fact".
[Presenter - Is it the start of another volatile week?]
Harry Skaliotis, Head of Client Portfolio Management at Man AHL Diversified Fund --
"AHL is a systematic trend following manager. We've been short equities and long US treasuries and long commodities like gold. The safe haven assets are being sought out. We are not expecting any difference action this week. Certainly if we do see a reversion in the markets then we will be changing our positions but at the minute we are pretty defensively positioned across the spectrum".
[Presenter - So you agree that the downturn doesn't affect the level of risk right?]
Harry Skaliotis --
"I think one of the risks we were looking at was some forced selling of US treasuries. But the markets seemed to look through that. The focus will revert again to Europe. I haven't seen anything to suggest that the market is done with US Treasuries".
[Presenter - The US has been spared the price of the premium that many other countries struggling with high debt loads have had to pay. Do you think there is a small chance, a small risk that interest rates will not stay so low for an extended period?]
Harry Skaliotis --
"It doesn't appear to be an immediate risk [!]. The benefit that we have with our strategy, we are trading futures markets that are very liquid and we are following recent patterns of activity. So if we see a turnaround there we will be selling our positions.
The problem is where else will investors go? We do hold positions in Gold. Gold is up 20% this year. At its peak Silver was up 60%. From our perspective we are really trying to follow trends and try and profit from the full extent of the market trend. And when the market does reverse we will be giving up some of that. So we are not going to anticipate what the fair level of gold is [!] or try and get out of the market before that. But there is no reason to expect that that trend will not continue."
[On FX markets]
"It's really a defensive portfolio across the board. The one exception is the currency markets. We've been short the US dollar and we've been cutting that exposure. We've favoured more the commodity currencies over the dollar [Amazing] The fundamentals of the Australian economy have supported the Australian dollar as well as interest rates.....We do have more risk appetite there. But otherwise be long bonds, short equity markets, long precious metals and short energy markets."
[On traditional safe haven currencies, the swiss franc and yen]
"We've had smaller positions there. We have a long position in the Japanese Yen, a smaller position in the swiss franc. Obviously we've seen some intervention by the central banks there."
The Man AHL Diversified Fund is designed to outperform when markets have clear upward or downward trends i.e. conditions of momentum. The fund is likely to underperform when there is mean reversion. David Harding once said that a good trend follower will get just over half their guesses right which would lock in a profit over the course of a trading year. It would be very interesting to see if a trend following manager like Man AHL could combine the insights of both styles -- momentum and mean reversion. That way you could ride the trends and counter-trends under all conditions profitably and at low risk rather than timing the entry and exit based on one methodology and thereby be exposed to volatility that you were not prepared for.
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Man AHL Alpha (AUD) - An overviewby maninvestments750 views
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