The independent financial services boutique ISP Group and quantitative investment specialist Alquant put advanced techniques at the service of their clients.
Using quantitative methods and automated algorithms, they have developed an Active Long Volatility strategy that delivers an effective and cost-attractive hedge against significant drawdowns as well as uncorrelated returns to the equity market through dynamic volatility exposure.
Investors typically diversify unsystematic risk quite well within specific asset classes, while their asset allocation is often still heavily dominated by stocks and bonds. However, building a truly diversified portfolio requires combining assets that behave differently or that statistically have a negative or low correlation. To this end, Active Long Volatility is one of the most effective investments in terms of diversification. The main added value of an Active Long Volatility strategy is its anti-correlation with the economic and growth cycles and its explosive performance during market crises. Alquant has developed a unique Active Long Volatility solution called Alvola and has even gone one step further. In addition to outperforming during market crises, Alvola aims to further optimize long volatility exposure to avoid unnecessary hedging costs during calm market phases.
Marco Bartolucci, CEO of ISP Group, comments: “Using long and short volatility overlays enables asset managers to generate positive performances for their portfolios irrespective of market cycles. Despite a generally negative correlation of volatility with share prices, Alquant’s intelligent strategy called “Alvola” has delivered explosive performance with this Active Long Volatility method.”
According to Guillaume Bourquenoud, CEO of Alquant, quantitative methods and advanced algorithms can now be used to design smart, rule-based hedging strategies that dynamically switch between long and short VIX[1] futures, with proven hedging ability while offering positive absolute returns in rising markets.
Fabio Oertle, Head of Structured Products and AMCs at ISP Group, comments: "The collaboration with the former ETH team of Alquant is very professional. Another great example of how ISP’s AMC setup enables asset managers like Alquant to easily bring innovative solutions and unique products to qualified investors."
Also read: Democratizing the missing portfolio component: Active Long Volatility
ISP Group AG (www.ispgroup.com) is an independent financial services boutique founded in 1993 and headquartered in Zurich. We serve corporates, banks and other financial institutions, traders, and investors through a unique blend of the latest technology, high-grade services and the extensive expertise of our interdisciplinary teams.
We are specialized in Structured Credit, Fixed Income and Structured Products & AMCs and offer Paying Agent, Placement Agent, Custody and Wealth & Asset Management services. ISP Group operates as a licensed securities firm under the regulations of the Swiss Financial Market Supervisory Authority (FINMA), the Israeli Securities Authority (ISA) and the Hong Kong Securities and Futures Commission (SFC) to carry out Type 1 (dealing in securities) and Type 4 (advising on securities) activities.
ISP Group has offices in Switzerland (Zurich, Lugano and Geneva), Israel, Liechtenstein and Hong Kong.
Alquant (www.alquant.com) is an innovative Swiss quantitative asset management and financial research firm. Alquant aims to consistently generate alpha in global equity markets across business cycles, based on a disciplined approach and strong expertise in crisis alpha solutions. Our investment products are designed to take advantage of equity market volatility for the benefit of our clients and deliver strong performance during significant downturns and thus protecting their portfolios in these periods.
Our systematic strategies run on quantitative and advanced computational techniques. We believe a strong culture of scientific research and using the latest technology, is the foundation of a successful quantitative investment process.
Our team consists of mathematicians, computer scientists, economists and business builders, all with ETH and EPFL backgrounds and experience at leading financial institutions as well as large tech companies.
Alquant has applied to the Swiss Financial Market Supervisory Authority (FINMA) for a licence as a manager of collective assets, which is expected to be granted in the course of 2021.
[1] Chicago Board Options Exchange Volatility Index
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