INVESTMENT STRATEGY
Apeiron's strategy involves three key elements; forecasting, execution and betsizing, and risk management.
Forecasting
Firstly, we observe and document the facts relating to the current configuration of an economic system. By looking at facts only at this point, we are able to objectively observe, rather than build arguments to fit our biases. From these facts, and with knowledge of how they interrelate, we develop various scenarios that describe potential market and economic trends.
Entry Execution and Betsizing
We use a number of technical and behavioural tools which add rigor and repeatability to our process. We are constantly scanning the markets for low risk entry points from which to express our forecasts, ensuring that our losses on unprofitable trades are tightly managed.
In assessing the potential of a candidate trade, we utilize a systematic bet-sizing approach based on the Kelly Criterion. In this part of our process, we are able to define “our edge” probabilistically for each opportunity. By defining our edge in this manner on a trade by trade basis, we are able to allocate capital efficiently and consistently, adding another layer of systematic rigor to our process (See Appendix 2 – Kelly Criterion).
Risk Management
As a macro manager, we require conviction to maximize our profit opportunities. With this in mind, we employ a quantitative risk management process which focuses on reducing concentration risks (See Appendix 1 – Risk Management).
In addition to this, we utilise a behavioural overlay to our risk management process, which helps to reduce the impact of cyclicality on our trading returns.
OUR TRADING EDGE
Apeiron focuses on achieving high returns for its investors. Apeiron gives investors access to investment professionals, investment strategies and risk management techniques that are often only available to institutional investors. However, Aperion Management knows how important it is to balance making money with managing risk.
Having traded many markets over many years, the Apeiron Investment Team understand that markets can move abruptly and unexpectedly, catching many participants off guard. Whilst the Fund forecasts specific market outcomes to generate returns, the risk management process is designed to withstand adverse market outcomes.
Most funds can generate profits when market conditions are favourable. However, it is a different story if good market conditions disappear. Only funds like Apeiron that apply comprehensive risk management practices are able to protect capital in the face of unfavourable market events, even generate profits during such occasions. This is Apeiron’s edge.
1. Our performance over time is not correlated to any individual asset class.
We have a strong track record of delivering absolute returns for our investors.
2. We allocate capital optimally and consistently using our quantitative bet sizing and risk management models.
We define our edge probabilistically on each trade using our model (which is based on the Kelly Criterion), giving us an optimal bet size (refer to Appendix 2 – Kelly Criterion).
Under or over betting can have a dramatic impact on performance over time. This part of our process ensures that we continue to allocate capital efficiently.
3. Our risk management processes are successful in minimizing losses and maximizing profits.
We identify low risk entry points in expressing our forecasts. This enables us to consistently deliver an average win to average loss ratio in excess of 2.5:1.
4. Our performance is typically strong following major turns in markets. Whilst much of our performance is attributable to riding trends, as a macro manager, we rarely participate in the late stages of trends; for fundamental reasons.
The behavioural characteristics of market turns, including increased market correlations enable us to identify low risk entry points consistent with our investment philosophy.
For this reason, our performance characteristics tend to complement trend following CTA style managers in a portfolio.
