Dear Valor Investors,
This has been a tumultuous time for our aggressive strategies. As we mentioned in our last Valor update (http://www.managedforexhub.com/month-end-updates/valor-fx-update/), we had parted ways with the former Valor trade team who had breached their risk parameters.
In looking for a replacement, we opted to go with a strategy that had a far more conservative mandate. We have been monitoring the lead trader and his trading program known as Kaizen FX for some time now. We approved of the methodology and know that he has in excess of $18M under management. Up until Nov.11 he had not exceeded an 8% in Drawdown since the fund’s inception in 2011 all while delivering an average monthly return of around of approx. 3%
Literally within moments of finalizing our agreement with the trade team and attaching him to the account, his first trade was initiated. This in itself was surprising since the strategy trades very infrequently ( prior to Nov. 11th its last sequence of trades was Oct. 23rd ).
These positions on USDJPY immediately went negative and closed for a loss. As unbelievable as it seemed to us, a strategy which hadn’t exceeded an 8% drawdown since 2011 almost doubled that amount within 48 hours of us adding it. We were quite literally speechless regarding the timing.
We reached out to the trade team to make sure there wasn’t an error or that the wrong strategy wasn’t employed; we received the following response…
“Yes the strategy is the same it has been for years. I’ve spoken with nearly all our investors today and while it is certainly not ideal we are within the trading parameters. If you break it down per trade; you’ll notice that we didn’t lose more than roughly 1% on each position and we had the misfortune of back to back to back losing sequences. The strategy (since inception – May, 2011) has had 5 losing months…averaging 2 per year. If you look at our Alpari account you’ll notice that we faced a similar situation back in March of this year. The account was -8% at one point during the month and we closed March -1.29%. Again, its far from ideal to have back to back to back losing trade sequences however its nothing we have not seen before..and no place we have not been before. I’m confident that we will recover this.”
Even with the loss they are still up over 20% on the year however we realize this is of little consequence to our clients. For us, it was the timing that was just so hard to grasp; to have a strategy with this nature and this history begin the worst cycle in its history literally hours after we attached it.
We have had our share of valleys throughout the past 4 years, however these last 2 months with Valor have been our deepest. We are confident that we will recover these and we are pleased that our core fund has continued to perform well during this stretch however this doesn’t lessen the sting for our clients in Valor especially those that joined within the past 2 months.
We realize that it’s pointless to make excuses and that’s not the point of this message. However it’s important that our clients understand the rationale behind this particular change. Our intention after the previous trader’s losses was to ease back in with a conservative strategy. We have built an extensive “Trade Lab” over the year where we have monitored dozens of traders/strategies and given its history, this one stood out as the definite best candidate.
Although we happened to pick the worst possible timing to connect the trader, it doesn’t erase what he has accomplished over the years. He still maintains a stellar record and still has multiple millions under management, with their own clients, we just had the worst possible luck with our timing that one could possibly imagine.
We try as much as possible to remove emotion from our decision process but this one definitely stung. We are not making any rash decisions with this trader; he has shown an ability to recover in the past and we are going to give him that opportunity again but we wanted to keep our communication open with you and at least let you know the context surrounding the recent trading. Full performance details of the trading team known as Kaizen FX can be found on the site here: http://www.myfxbook.com/members/ManagedFXHub/kaizen-fx/992368 (where you can see the drawdown which occurred hours after we connected). We are certainly looking forward to a better turn of luck in our timing going forward with them. More details on the rest of our programs which have been doing far better, will be coming out within the coming days.