Stockholm (HedgeNordic) – After Henric Nordin left the helm of multi-asset, multi-strategy fund Tenoris One in December, a new portfolio manager came in with a trend-following-inspired investment approach. Martin Redgård, most recently CIO at US-based CTA manager Taaffeite Capital Management, took over the management of Tenoris One – renamed into Epok – at the turn of the year to run his time-tested short-term systematic trend-following strategy.
“After several years of working at Taaffeite, I took the option to leave with my intellectual property in 2019 in order to focus on starting my own project here in Sweden,” Redgård tells HedgeNordic. Following a challenging process of setting up his own fund amid toughening regulations and requirements, Redgård ended up joining forces with fund platform AIFM to take over the fund structure of Tenoris One to run his fund called Epok. “As the previous manager was interested in stepping off and I was interested in stepping into the fund management arena, the agreement to take over the fund as of January 1 turned out to be a good handshake.”
Trend-Following, Mean Reversion, and Tight Risk Control
Redgård relies on a short-term quantitative approach to capture opportunities stemming from momentum, price action, and breached significant price levels across G20 currencies and major stock market indices. “Since 2011 I have been using pretty much the same strategy that resembles the classical trend-following approach of looking for periodical highs and lows to capture uptrends and downtrends,” explains Redgård. “I also have some capacity to engage in mean-reversion trades to hedge some of the trend-following positions,” he continues. Some underlying markets may periodically be more suitable for mean-reversion trades and others may be more suitable for trend-following trades, according to Redgård. “I do both to hedge bets against each other.”
“Since 2011 I have been using pretty much the same strategy that resembles the classical trend-following approach of looking for periodical highs and lows to capture uptrends and downtrends.”
Redgård also employs a tight risk management strategy that involves letting winners run and cutting off losers quickly. “The risk management is based on using pre-determined stop losses in each bet and using volatility-weighted risk allocation,” explains Redgård. “I analyze correlations between positions and maintain volatility-based maximum exposure in any given general direction in the market,” he elaborates. This approach to risk management is also reflected in his objectives for Epok. “The objective is to return somewhere between 8 to 10 percent on a yearly basis while keeping downside risk very low.” The ultimate target is to achieve a long-term Sharpe ratio above one.
Epok is designed to deliver in every market environment. The ideal market conditions, however, are offered by so-called divergent markets characterized by strong strength of directional shifts in market prices, according to Redgård. “I am not rooting for or hoping for tumbling markets, but these offer very good conditions,” he explains. “Downside volatility is more aggressive and is more suitable for any kind of trend-follower,” he adds. “It is not a fundamental belief that is reflected in my systematic approach. I just see price streams and trade off them.”
“You can always find trends somewhere, which is what the strategy is trying to do.”
Epok gained 4.7 percent in its first month of operations. Having traded only stock market indices so far in 2023, Redgård will soon deploy his short-term trend-following strategy across G20 currency markets after finalizing the currency trading set-up for Epok. Redgård is confident the wide range of underlying markets offers Epok the possibility to find and capture trends at any point in time. “You can always find trends somewhere, which is what the strategy is trying to do,” he explains. “If more stuff is trending, the better, which is more coherent with a divergent overall market situation.”
Epok caters to both institutional and retail investors looking for uncorrelated return streams in their portfolios, according to Redgård. “Investors as a whole have a lot of beta exposure in their portfolios right now, especially in the Scandinavian region,” says the portfolio manager of Epok. “All funds that offer downside protection and can deliver big upsides in divergent market situations such as those experienced last year represent a good addition to portfolios,” he elaborates. “Particularly for retail investors, Epok is a good hedge against the massive beta exposure that is predominant across most retail portfolios.”