By Matthew Bradbard
In this month’s Manager’s Corner Update, we have Zoi Capital, answer our “25 Questions Every Investor Should Ask”. Plus get the latest rankings from Barclay Hedge and sign up to receive our Managed Futures Kit.
The Telio system employed by Zoi Capital, LLC was designed to provide non-correlated returns by trading futures contracts in the direction of market trends using a short term statistical mean reversion strategy. The indicators that are employed by the system include trend, momentum, and standard deviation calculations on the daily price movements of the futures contracts. All trading is on regulated electronic futures exchanges including stock index futures, currency futures, and interest rate, metal, energy, and agriculture futures.
Click here to access the performance capsule for Zoi Capital’s CTA Program.
25 Questions Every Investor Should Ask
1.) What is the name of the program/programs and who are the listed Principals?
The firm is Zoi Capital, LLC and the Principals are Konstantinos (Gus) Tsahas out of NY and Robert Terpilowski out of Seattle.
Only one program is marketed, by the name of Telio 2X.
2.) Can you provide us with some details of your corporate background?
See below answers in #4
3.) Who are the Principals with trading authority?
K. Gus Tsahas has trading authority and can take over as a backup.
4.) Can you provide details on the principal and/or managers’ education, career and trading background?
K. Gus Tsahas - Mr. Tsahas is a Co-Founder and Managing Member of Zoi Capital since inception in 2007, which was formed to trade programs developed by the founders starting with the Telio program which is currently being marketed. He primarily serves as the Chief Risk Officer responsible for maintaining the risk profile within the program’s specifications. Gus has experience in developing trading systems since 2001 utilizing quantitative methods for testing and execution of systems in the equities and futures markets.
He started as an engineer in software and communications for MCI and later moved to Lehman Brothers to develop the IT infrastructure and trading technology for the international branches. Gus was part of the Lehman Brothers investment banking team that organized very profitable consortiums that invested in international cellular companies. Since 1991 Mr. Tsahas has an interest in a technical construction firm specializing in building computer rooms, data communications networks, laboratories, and other IT related projects. Mr. Tsahas is a graduate of Pratt Institute with a Bachelor of Engineering, and went on to earn a MS in Electrical Engineering and MS in Management from Polytechnic Institute of New York. Gus holds an MS in Financial Engineering from CUNY Baruch in 2007. Mr. Tsahas is a CFTC-listed Principal and Associated Person for Zoi Capital and NFA registered. Series 3 (Commodity Futures Examination) examination qualified.
Robert Terpilowski - Mr. Terpilowski is a Co-Founder and Managing Member of Zoi Capital since inception in 2007. He is the Chief Investment Officer in charge of trading operations and research. His responsibilities include developing the company IT infrastructure, running the trading desk for daily executions and monitoring positions. Robert is also responsible for ongoing research and development of trading strategies. He has been a software developer for multiple industries since 1998 and has developed software for algorithmic trading, system back testing and API automation since 2001. He is a graduate of the University of Washington, attaining both a Bachelor and Master of Science degrees in Civil Engineering. Mr. Terpilowski is a CFTC-listed Principal and Associated Person for Zoi Capital and NFA registered and is Series 3 (Commodity Futures Examination) and Series 30 (Futures Branch) examination qualified.
5.) Which firm calculates your performance numbers?
Turnkey Trading Partners, 10 South Riverside Plaza, Suite 1800, Chicago, IL 60606
6.) What is the minimum investment for your program?
The minimum investment is $100,000 but preferable accounts are at the $250,000 level. The smaller accounts have additional volatility and might not be able to take certain trades due to risk on the trades.
7.) Do you accept notional funding?
We accept notional funding with a minimum at 2:1
8.) What is your management and incentive fee structure?
Our base fee structure is 1/20
9.) What is your program’s capacity?
We estimate the programs capacity at $300M without major changes in implementation.
10.) When did you start trading this program?
We started trading this program in July of 2007 in proprietary accounts and we have continued trading these prop accounts to the present time without any major changes. The first customer account started in April 2010 but we were not actively marketing to the public. The first DDOC was approved in May 2013 and we started marketing to the public in the fall of 2013.
11.) What type of accounts do you manage?
Managed accounts with a mix of customers in CPO’s and individuals.
12.) Can you give a brief description of your program?
The Telio 2X program is designed to provide non-correlated returns by trading futures contracts in the direction of market trends using a short term statistical mean reversion strategy. The indicators that are employed by the system include trend, momentum, and standard deviation calculations on the daily price movements of the futures contracts. The holding period for the positions is one to five days. All trading is on regulated electronic futures exchanges including equity index futures, currency futures, and interest rate, metal, energy, and agriculture futures.
13.) Do you have a systematic or discretionary approach to the market and what are your program goals?
We are systematic traders and the program is leveraged to provide annual returns in the 15%-20% range with a maximum drawdown of 20%.
14.) What is the average holding period for each trade?
The average holding period of a profitable trade is 1.5 days.
The average holding period of a losing trade is 2.5 days.
15.) Do you trade options within your program? If yes, please describe the types of options traded and how options risk is monitored.
No options are traded in the Telio program, all trades are executed with electronic exchange traded futures contracts.
16.) Are there any liquidity constraints in the markets you trade?
We trade 19 markets which were chosen with liquidity as a consideration so no constraints at this time.
17.) In what types of market environments does your trading program do well and /or struggle?
We do well in all market environments except when volatility spikes and we struggle on the first adverse move.
18.) What is the standard range of margin to equity usage for the program and how long do you hold the average trade?
The average margin to equity is 7% when we have trades as we are out of the markets on 20-25% of the days.
19.) How do you manage risk/reward and what metrics are employed?
The position sizes and protective stops are volatility based. The risk per trade is from 2.0 to 3.5% away from the entry price and correlated contracts can be held. There is a 5% daily loss limit where positions will be closed out for each account. We do not have a reward target but close out positions the next morning after a profitable close the evening earlier.
20.) What are the optimal market conditions for your strategy?
A market with high volatility or a trending market.
21.) Describe your worst drawdown to date, how did it happen and what actions have been taken (if any) to prevent similar drawdown’s?
The worse drawdown to date has been 5/4/11 - 5/5/11 where we had a vicious 15% drawdown in two days holding energies, precious metals, Euro and the Dow. The headlines were that Bin Laden was killed and the market turned to a risk off mode but headlines also work in our favor in other cases.
We have changed our program to where we have a 5% daily limit on the accounts and which would have limited our losses to approximately 5% and we would not have participated in the additional losses the second day as we would be out of the positions. We expect to hit the 5% stop limit between zero and two times a year.
22.) What are your investment goals?
The program is leveraged to provide 15-20% annual average returns with a 20% maximum drawdown and our goal is for the program to stay within these parameters.
23.) What makes your program unique and different from other managers in your sector?
Telio’s main differentiation points is there are very few existing programs utilizing mean reversion as the main strategy and along with our short holding time of one to five days keeps us uncorrelated with other programs. We are .30-.35 correlated to CTA indexes and other programs and very low to no correlation with equity and bond indexes.
24.) Do you feel you have an edge if so what is it?
Our edge is our ability to identify mean reverting points for futures contracts while using proprietary work to filter, size and manage positions.
25.) What is the one piece of advice that you would give to a new start-up CTA?
I would advise a new start-up to limit the changes they make to their program once they go live and hire the best consultants they can identify.