Lyxor Epsilon Global Trend

Metori Capital Management is an independent quantitative fund manager based in Paris running about $500 million into pure-style price-driven trend following programs. The Epsilon Global Trend fund launched in April 2011 (the investment team of Metori managed the strategy within Lyxor before becoming independent) and runs medium to long term trend following programs targeting 8-10% annualised volatility. The fund invests globally (US, Europe and China) across 45 listed financial futures contracts encompassing equities, bonds, rates and currencies. Instead of evaluating each market independently, the strategy employs a holistic statistical process (Kalman filters) to estimate trends and risks globally. Trend estimators (6-9 months average life) and shorter term estimates of volatilities and correlation (1-2 months average life) fed the mean-variance portfolio optimizer that produces optimal allocations. By clustering markets based on prevailing correlations, the resulting portfolio allocation is selective (the model looks at the marginal risk-adjusted benefit of adding a new position) and dynamic. This is done continuously allowing the portfolio to deal with instabilities, while also minimising portfolio turnover (the ‘gamma cost’). Portfolio leverage typically ranges between 10-15x.