samssara capital - stat arb investors pitchbook
TRANSCRIPT
Statistical Arbitrage – Investors pitch-book on medium & low frequency
www.samssara.com
Slide - 2Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Samssara investment products:Samsarra ConservativeSamssara Aggressive
Slide - 3Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Product snapshot
Product Samssara Conservative
Samssara Aggressive
Size in Cr 75 50
Leveraged gross exposure in Cr 150 150
Allocation by strategy in Cr
Basket - Medium Freq 45.0 40.0
Single stock- Medium Freq 22.5 30.0
Basket - Low Freq 60.0 50.0
Single stock - Low Freq 22.5 30.0
Expected returns p.a. 20-28% 30-42%
Recommended investment period (years) 2 3
Fee structure (fixed/performance) 2%/20% 2%/25%
Exit load (before recommended period) 2% 2%
Slide - 4Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Indicative term sheet – Baskets stat-arb
Details Terms
Investment Size in Cr 5 (recommended)
Leveraged gross exposure in Cr 15 (recommended)
Recommended and minimum investment period (months) 12 and 36+
Prime broker Can be chosen by the client
Fee structure (fixed/performance/bonus ticker/exit) 2%/20%*/25%**/~1%
Data feed costs (part of fixed fees) 18,000 INR / an
Prime brokerage costs 0.01%
Statutory levies such as STT At cost
* Performance calculations Net of costs not taxes
** bonus ticker kick-in Performance greater than 48% pa
Client reporting Daily – on a per trade basis
Risk – Leverage limits 3.5X
Risk – Single stock & Net exposure < 10% & < 8% of gross resp.
Risk – Portfolio stop loss 12% of drawdown
Slide - 5Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Indicative term sheet – Single stocks stat-arb
Details Terms
Investment Size in Cr 1.0-1.5 (recommended)
Leveraged gross exposure in Cr 3.0-4.0 (recommended)
Recommended and minimum investment period (months) 6 and 36+
Prime broker Can be chosen by the client
Fee structure (fixed/performance/bonus ticker/exit) 2%/20%*/25%**/~1%
Data feed costs (part of fixed fees) 18,000 INR / an
Prime brokerage costs 0.01%
Statutory levies such as STT At cost
* Performance calculations Net of costs not taxes
** bonus ticker kick-in Performance greater than 48% pa
Client reporting Daily – on a per trade basis
Risk – Leverage limits 3.5X
Risk – Single stock & Net exposure < 10% & < 8% of gross resp.
Risk – Portfolio stop loss 12% of drawdown
Slide - 6Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Product risks and drawdowns
Product 2:1 Leverage 3:1 Leverage
Average Annualized Return 24% 36%
Annualized Volatility 14% 21%
Probability of losing 10% in 3 Year 1% 1.2%
Probability of losing 5% in 1 Year 5% 10%
Probability of losing 10% in 1 Year 3% 6%
Probability of losing 20% in 1 Year 1% 3%
Probability of losing 5% in 6 Months 7% 14%
Probability of losing 10% in 6 Months 4% 8%
Probability of losing 20% in 6 Months 1.5% 4%
Slide - 7Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Why Samssara?
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Combination of commitment, capability and opportunity• Samssara commitment
• Long term commitment to growing the business - passionate about the subject combined with academic and practical expertise – enjoy what we do
• Long term commitment with investors
• Samssara stability• Lean cost structure and very low corporate overheads• Term sheets to attract 3 corporate investors / distribution partners with symbolic
corpus invested in exchange of token equity
• Samssara capability• Dedicated quantitative traders and analysts with international experience• Proven models across different market conditions and frequencies• Ability to re-innovate and build new and leading edge quant models
• Opportunity due to limited expertise on quantitative trading in the market• Most quant traders reside outside India due to lack of scope• Less know-how in India about the quant based market structure• 50-60% of quant trading in India done from outside the country• Lack of expertise amongst Indian investors and proprietary houses
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What we offer to end investors…
• Alternative asset class (independent to equity return)• Hedge to volatile markets (e.g.: 2008)• Client portfolio diversification
• X% in equities vs. Y% in quantitative market neutral• Superior Alpha• Low correlation to market ([-0.3 : 0.3])• High Sharpe ratio [> 3]• Consistent in Historical Back-test and Live
• Currently tracking 1500 Baskets• Currently tracking 3 dimensions
Slide - 10Strictly private and confidentialThis presentation is intended solely for the recipient and should not be replicated in any form or manner electronic or otherwise
Statistical Arbitrage Methodology
Stock futures with average daily turnover > 25 Cr. Per day
Divide stocks into sub-sector
Create universe of pairs and baskets
Daily statistical checks for mean reversions
Live time checks for risk neutrality
Live time checks for the portfolio optimization
Live time checks for optimal execution and order book depth
Automated execution, position management and trade bookings
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Samssara team
•Manish Jalan is the chief strategist and director of the company. Prior to Samssara, Manish was a Quantitative Prop Trader in Tokyo, with Merrill Lynch for over 4 Yrs. He has developed and implemented factor and high/medium/low frequency trading models, which contributed more than $10 Mn. to the Prop Desk profitability. Prior to Merrill, Manish has worked with Simplex Technology in Japan and Aditi Technologies in Bangalore. Manish is a B. Tech and M. Tech from IIT Bombay.
•Rajesh Baheti is the incubation partner and director of the company and has more then 15 years of experience in trading India markets.. He is the founding director of Crossseas Capital Services (One of the first clients of Samssara) which currently operates 5 offices in Mumbai and several others across the country. Crossseas provides advisory in systematic trading opportunities to selected clients in India and abroad. Rajesh holds a PGDM from IIMA.
•Mangesh Hirve is the executive director of the company and has more than 15 years of experience in Financial Services. Mangesh has led teams delivering complex analytics projects in financial services for European asset management firms and was profiled on the Swiss national TV and in the magazine Bilanz. Earlier he has worked with Capgemini Consulting where he was the Country Lead for Financial Services and sales manager for France managing EUR 15 mn. Mangesh holds a B. Tech from IIT Bombay and an MBA from INSEAD in France.
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Track record
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Track record pre Samssara
Chief Strategy Developer: MJ• Worked for 3 years at
• Proprietary trading desk at Merrill Lynch, Tokyo• Worked with highly qualified systematic quantitative traders• Traded Asia-Pac and emerging markets using automated quant models
• Assets Managed• Medium frequency long/short models: $25 mn. long/ $25 mn. short• High frequency intra day models: $15 mn. daily turnover
• Returns• Generated profits of more then $10 mn. using quant models• Contributed significantly with quant intelligence on the overall
profitability of the desk which stood at $150 mn. Within 3 years.• India centric:
• Running models in Indian market since Jul’2009 on gross exposure of Rs. 20 cr.
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Performance in live trading at Samssara
Analysis on Gross Exposure (Annualized)
Average ROI Annually 20.60%
Volatility in ROI Annually 7.17%
Annualized Sharpe Ratio (of, ROI) 2.87
Daily VAR as % of Gross Invested Capital 1.20%
Peak to Trough Drawdown (On Gross Exposure) -1.96%
Peak to Trough Drawdown on Nifty -11.81%
Analysis on Margin Exposure (of 33 %)
Annualized ROI On Margin 61.80%
Volatility in ROI Annually On Margin 21.52%
Annualized Sharpe Ratio, On Margin 2.87
Daily VAR as % of Margin Exposure 3.61%
Peak to Trough Drawdown -5.88%- Incepted in July’ 2009 in NSE stock futures
- Started with gross exposure of Rs. 1 cr. and scaled to current Rs. 20 cr.
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ROI (%) on Gross Exposure – Live Trading
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ROI (%) Comparison – Live Trading
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Monthly P&L – Live Trading
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Systematic Risks and Mitigation
Risk factor Mitigation in high-frequency Mitigation in medium/low frequency
• Market direction risk
• Very short term (<5 min.)• Holding >5 min. is dollar neutral
• Always dollar neutral•Equal dollar value of long/short
• Sector risk • Very short term• Unwind all positions intra-day
•Always sector/sub industry neutral
• Single stock risk • Don’t trade on day of earnings (T-1, T+1)• Portfolio never skewed on single stock
•Long side exposure on single stock less then 10%•Short side exposure on singe stock less then 6%
• Liquidity risk • Confined to Nifty 50 stocks• Stocks which trades more then $5mn. Daily
•Confined to 90 most liquid futures•Never hold more then 10% of ADV
• Corporate action risk (stock-split etc.)
•Automated handling of stock splits and bonus issuance
•Slippage risk • Automated executions to minimize slippage• Uses advanced multiple signal techniques to enter and exit positions.
•System crash / software risk
•Advanced backup and auto-recovery to manage current positions•Ensures that system can be re-started from where stopped
Personnel risk •Dedicated man-power to each strategy•Requires minimal IT support for everyday operation•Requires minimal training and very easy to handle
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Back test results
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Single stock pairs and baskets across sectors in India
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Historical back-test: On exposure of (2:1) & (3:1)
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Contact us
• Samssara Capital Technologies LLP208/209, Veena Chambers21 Dalal StreetMumbai – 400001
• Web: www.samssara.com • Contact Person:
• Manish Jalan • Tel: +919867832726• Email: [email protected]