Frequently Asked Questions
1. Is it a fund?
– No, it’s not a fund. Each client’s capital is held in a separately managed account opened in their name at a 3rd party financial institution for brokerage & custody. You have 24/7 access to view your portfolio, or to make deposits and withdrawals. We, as investment managers, will have the authority to trade in this account.
2. Where is the account domiciled?
– The account will normally be opened at Interactive Brokers. Depending on the country of residence of the client, IB will generally open the client account in a relevant entity within the Interactive Brokers group – such as IB Hong Kong, or IB Luxembourg, etc.
3. In what currency do you manage client accounts?
– We generally manage client portfolios in USD. This can be discussed if the client has special needs regarding this point.
4. How often are the fees charged?
– We charge a performance fee only. Unlike the others, we don’t make any money from commissions, management fee, etc. We don’t get paid if you don’t make any money. The 25% performance fee, calculated by Interactive Brokers, is charged quarterly (January, March, June, December). This fee is only applicable if the portfolio value on the current date is higher than the highest value seen on previous fee calculation dates.
5. How do you take your fees? Are you selling the stocks to get paid?
– IB calculates the performance fee and this will be deducted from your account and paid to us. No, we’re not selling the stocks in your portfolio to get paid.
6. Can you tell me more about your risk management strategy?
– We try to maintain a certain positioning in the portfolio that results in:
- Short Positions: A basket of shorts add a layer of stability and on their own to make steady returns. We do not have short positions all the time (none in Nov 2020).
- Starter Long Positions: These are stocks that we think have a place in the portfolio, but we want certain things to happen before we increase our exposure. So from time to time, we might have a 0.1% or some small exposure to certain stocks and then scale it up over time as our thesis starts gaining momentum.
- Index Futures Overlays: This is our trend-following component. Their main purpose is to protect the portfolio from MTM losses when the market crashes or a particular sector (say tech) outperforms. We could have a situation like in March 2020 where we believe in our existing portfolio but the market is clearly trending down. In such situations, index futures overlay short positions protect our portfolio MTM value.
All the above have a place in the portfolio, and we manage each of them to be profitable at a position level.