20,000% return in 10 years! long/short everything strategy.

16th Apr '21 by Philip999

42 comments 3227 reads

I'm always looking for new ideas and came across a strategy employed by Saxo, the Macro Discretionary Trading strategy. It's a long and short strategy for the whole of the market, equity, commodities, fx.. the returns have been phenomenal in the last decade (need to adjust for performance fee).

It's clearly super high risk and lacks any real accountability as theres no investment or fund manager as such and not a huge amount in the way of an investment plan. What's really impressive is the tiny hit to returns during covid last year and the returns coming out of the GFC.

Can anyone shed any further light on this? Experience with Saxo or any similar vehicles out there? The also have an FX only strategy that is generally uncorrelated to equity markets which I like the look of by means of diversification.

https://www.home.saxo/en-gb/pr...

Best, Phil

Unlock with Email

Unlock with Google

Already have an account?
Login here

Philip999

22nd Apr '21

Hi Neil, I think you’re over thinking this one. When I joined the strategy two existing short positions in the Russel and Nasdaq were open. These were both closed. Subsequently two long positions were opened for gold and silver. I’ve just woke up this morning, currently in California hence the time difference and the positioning has once again changed.

Hope that helps.

gus 1065

23rd Apr '21

Hi Phil.

On the subject of other strategy providers, I was prompted by this morning’s trading update from Record (LON:REC) (I’m a shareholder so you might expect me to have a handle on what their customer base is!) to have a look at their website to see what their offering is.

https://www.recordcm.com/inves...

I’ve always thought of them as a currency manager (advisory and investment) for institutional clients only, but I note they provide services to “family offices” so although hardly retail they may have a lower entry point for managed currency investment services that might be of interest. Probably out of my league but maybe worth a look.

Gus.

Neil D56

Ok well that makes more sense. Don't believe I was overthinking as I used to run a managed futures fund so just wanted to clarify that apples were not oranges!

12th May '21

Hi again Philip999.

Thought I would freshen up this thread again. I took the plunge about three weeks ago and set up an account with Saxo and invested in the Macro fund. I looked at the FX fund but for similarly high fees it’s track record over the past few years has been indifferent and from the experience of my own time in the City I think the FX trading space is so crowded and competitive that it’s very hard to consistently make a decent return. You’ll already have visibility on the fund and have your own views but thought it might be useful to post some feedback for the benefit of others interested in the topic.

Early days, but I’m pleased with the investment. The Saxo platform is extensive and a good source of information (although no AIM coverage) that is quite easy to navigate. The fund itself is pretty much as expected. Long/short strategy on Stock Index CFDs, commodities, FX and government bonds. All deep and liquid markets - no trading in individual stocks or corporate bonds so far. Recurring trade at the moment is short NASDAQ/US T-bonds, long Gold and Silver with a bit of a dabble in the Bund and Euro Stock index. They called the US trades before the last two day’s sell off so have made a decent return to date. Notwithstanding a £/US$ strengthening headwind (my account is in £’s but the fund is denominated in US$’s), I am up about 5% in £ terms to date. Quite fascinating to watch the trades being placed into the account. It’s all very transparent and timely. A few initial observations:-

Although the notional exposures are large the trading appears prudent. Stops are in place and positions are refreshed regularly intra day. Most positions appear to be closed out daily. I get the impression there is close hands on management acting and reacting in real time. Although it is classified as “high risk” the daily P&L movements are to date in the range of 0 to 2% of notional principal - albeit the markets are relatively quiet at the moment. The marketing literature talks of the potential risk of 20% drawdown in extremis which needs to be noted.

Watching the positions being taken is proving to be a bit of an education. There’s a coherent strategy behind the different instruments being used and it’s interesting to see how a wider Macro view (e.g US inflation will be seen as more of an issue) is implemented through complementary asset positions. They don’t get every trade correct but on balance they win more than they lose and appear to cut losers quickly and run winners to good effect.

Execution is slick. I have previously dabbled with an IG Spread bet account and used the stock indices in particular partially to hedge share holdings. With hindsight I was very unsophisticated in my approach and made (a bit of) money more by luck than judgement. I am seeing 10 or more trades a day across the account at all hours of the day and night which I wouldn’t be able to replicate. I think it’s a full time job to do this sort of thing properly and I have neither the time nor acumen to do so. It’s no surprise that something like 75% of retail punters lose money spread betting.

One of the objectives of the investment was to identify an asset that wasn’t closely correlated to a long equity markets portfolio. So far, it seems to be doing this nicely and this investment was a rare bright spot in yesterday’s sea of red!

Overall, I’m pleased with what I have found “inside the black box”. I wouldn’t put a large proportion of my portfolio into the fund but I think it’s a good complement to what else is in there. Thanks for bringing it to my attention.

Hi Gus,

Am always a more than a little sceptical on these types of products, especially with the numbers they have posted for previous years. However I may well take a look as they cover the sort of ground that few funds do- Macro discretionary is also available through the likes of Brevan Howard (one of the highest rated hedge fund outfits). I also do not think 20% downside is excessive given the risk that must be assumed to generate aforesaid returns! Guess time will tell on that one......

As i already trade my SIPP via SaxoTraderPro, I have asked for accessibility as its not obvious from the platform. Let me know how things progress- they have some knowledgeable guys amongst their ranks. The CIO Steen Jakobsen is very interesting to listen to via their podcasts and daily updates. I believe one of the traders/analysts responsible for the portfolio is Kay Van Petersen- who is based in the Far East.

13th May '21

Hi NeilD56.

Thanks for the feedback. I was/am sceptical too, trust but verify and all that, but am warming to both Saxo and their Macro product. I have heard of Brevan Howard but thought their focus was on the institutional and HNW market so not in my league. In terms of the riskiness of the investment my early impression is that the returns are driven not so much by taking big directional punts on high volatility products but rather frequent trading of low transaction cost/highly liquid indices to monetise a return from having a view of the direction of the overall markets. The capital is in constant use being worked continuously in and out of positions rather than riding on longer term more structured trades. Lots of small/medium wins rather than hunting for the mother lode.

Saxo seem to be one of the few players offering this type of product to a retail franchise although I suspect the likes of IG and CMC might follow suit in due course. It may be they’re wary of offering something like this to retail punters for fear of potential “inappropriate product” liabilities although a case could be made that having a pro running your derivatives exposure is safer than trying to do it for yourself (certainly applies to me). Saxo seem to get comfortable with this by having a pretty comprehensive disclaimer/assessment of investor profile and minimum entry ticket of US$20,000. Personally, I might be able to drive a car but I’m not sure I’d want to try and build an internal combustion engine.

Interested to hear if Saxo give you a view of their Macro trades without investing. They may see it as proprietary and take the view that if it were made public it could be copied by traders doing it for themselves. In a former City life most of my trading colleagues wouldn’t tell me what they had for breakfast let alone disclose their trading book!

Early days and as I say I’m warming to rather than endorsing the product at the moment. I’ll provide another update in due course and maybe Philip999 or other investors could provide their feedback too.

Gus- you might be interested in the Saxo morning call updates.......

Saxo Market Call (podbean.com)....generally informative with calls on indices, stocks, fx and bonds plus commodities. Alongside the commentary there are daily slides to illuminate their views/observations. There are other links to mainstream podcasts too.

I doubt the other spread-bet companies will ever offer those kind of products as they don't have the research capabilities that Saxo, as a bank, possess. It's the main reason I use Saxo, particularly that I can trade stocks, fx and derivatives via one platform. I believe they are the only ones to do so from the banking sector and allow retail investors to use SIPP funds to do so.

Good to talk to like-minded folk, keep in touch!

Neil

mwjackson

Great link to the podcast, thanks Neil

15th Jun '21

Hope you're well. I really wish Stockopedia allowed to @ people or message others as I always miss comments and do not look at discussion boards daily.

I'm happy with holding to date and have increased my position over the last few months, visibility is brilliant as you can see all the trades placed in real time and it does give food for thought.

My main priority was to diversify my investment portfolio holding which is primarily equity based, with access to commodities, treasuries, fx etc the Macro strategy really ticked a number of boxes. Perhaps most importantly having a managed portfolio with no input was a huge tick in the box as I can be time poor in this regard.

Given the risky nature of the strategy it ironically acts as a hedge to my equity portfolio. If you look through previous market draw downs the strategy generally provides returns in excess of any drawdown. I.e, it thrives on volatility and can struggle in times when the market has no real flow.

I note you mention the strategy is US dollar based, I hedge usd/gbp exposure via IG.

I'm really happy with performance to date, to be honest the monthly movements do not really bother me and if performance continues anywhere close to historical levels whilst the strategy hedges part of my portfolio I'll be very happy.

Any further thoughts from your perspective?

Best,

Phil

Good to hear from you. All good here thanks. Not sure if you have access to the “Old” Stocko site, but if you do it does have a User to User private message service. I sent you one just now - let me know if you receive it.

I agree with your summary of the benefits of the Saxo Macro fund. It does appear to be uncorrelated to the wider performance of the Equity markets and as such complements my other investments. Performance in the past few weeks has been mixed, more down days than up, which as you say is probably the second part of your comment about the fund struggling “when the market has no real flow”. It’s almost as if they’re drawn to making low conviction trades to be seen to keeping the fund invested. One other observation (based on a limited sample of performance in the last two months), is that the fund seems to be more successful with its Equity index/ commodity/fixed income trades than its FX trades (the recent focus on USD/AUD doesn’t seem to have been a good call). On the working assumption that the Macro manager adopts a Saxo house view on FX markets, it doesn’t draw me to making a parallel investment in the Saxo managed FX fund.

On the subject of “Other Investments”, that may offer something similar, I identified via the Investment Trust thread a couple of ITs that invest in the Brevan Howard Master Fund, Bh Macro (LON:BHMG) and Bh Macro (LON:BHMU) (£ and US$ denominated alternatives). BH was mentioned as a top ranked Hedge Fund manager earlier on this thread by Neil D56 but their direct focus is on institutional investors and the entry ticket was very high. These ITs appear to offer retail investor level access. Check out the table in the most recent of the three “Macro” user posts to see the reference to these two funds and their most recent relative performance.

https://www.stockopedia.com/co....

I’ve not had chance to look into them in any detail yet but at face value they appear to fit the bill. Here’s a link to more information on Bh Macro (LON:BHMG) . I note it is currently offered at a 1.9% discount to NAV. I will probably open a small position in this and track it’s performance against the Saxo Macro fund. One immediate observation is that it doesn’t appear to offer anything like the same level of transparency on the underlying trades so it’s pretty much a black box passive investment in the Brevan Howard fund.

https://www.theaic.co.uk/compa...

Interested to hear if anyone has invested in either of these.

A bit more digging into Bh Macro (LON:BHMG) . Here is the comparable table of monthly/annual performance of the BH Macro fund up to the end of December 2020 as denominated in £ and US$. Haven’t crunched the numbers but at first glance looks to be much less volatile than the Saxo fund in the original article but showing less overall long term absolute growth.

16th Jun '21

Thanks for providing info on BHMG, returns do look less impressive but again you can certainly see the out performance during volatile markets. If you're interested in some middle ground options the likes of Rit investments, Pershing square and capital gearing trust may be of interest. All conventional hedge funds who do take a long/short approach. Generally these are equity based so do not offer the wider exposure that the Macro Strategy does.

Updated market commentary has been released and pretty much backs up everything we've discussed. I suspect we'll cruise on low volatility during the summer months before inflation narrative potentially picks back up during late summer as the Fed repo facility is really disguising demand for treasuries (which is now been wound down), coupled with an outside chance of a green victory in Germany, rising rates/impending taper tantrum and no more stimulus cheques or furlough to fall back on, things will no doubt start to get spicy, particularly with growth stocks back to an all time highs. That being said, what on earth do I know!

https://www.home.saxo/en-gb/co...

Oh, and thanks for your private message. It came through to my email but I don't have the ability to respond.

letap73

22nd Jun '21

This is a very interesting thread - I was put off by the 20000% increase mentioned in the thread. The back end of this thread has been very rationale and certainly lacking the hyperbole of the return suggested in the title.

I do have a few questions:

1. The opening position of $20000 is quite large - would any large gains that are banked subject to any tax? My understanding is that spread bets are not subject to tax on my IG account.

2. If there us a tax implication - can this investment be put inside an ISA tax wrapper?

3. Can you bank gains - or does all the capital have to tied to the strategy. I assume you can withdraw some of the funds?

Hi letap73.

Pleased you were happy to read beyond the headline, although the 20,000% historic 10 year return does indeed seem to stand up to a closer examination. Not sure it is repeatable, however, and certainly diluted by the impact of the ongoing management and success fees.

On your specific questions (Phil or others pick me up if you have a different understanding), I believe the investment is a managed discretionary account trading in “real” financial instruments (not a spread betting a/c) so it will be liable to U.K. CGT. On the flip side, any losses should be offsettable against CGT gains. I’m not entirely clear on whether the management and success fees are deductible but I would expect them to be so.

As the investment is an account (as opposed to a security) I don’t think it can be held in an ISA (or a SIPP for that matter, although it may be possible for a SIPP to invest in the fund on your behalf so if it’s important you may want to look into it further). As the Bh Macro (LON:BHMG) fund described elsewhere in the thread has been repackaged as an Investment Trust, I think that this could be held in an ISA (although historic gains have not been so good).

Although I’ve not tried to take any funds out to date, the literature from Saxo states that the outstanding positions can be closed at any time and some/all funds can be withdrawn on demand.

Feel free to contact Saxo direct if you have any questions. I found them very friendly and responsive when I originally set up the account.

Many thanks for your response on this thread and on the investment trust thread - it is really appreciated.

9th Jul '21

I am now invested in this fund. Early impression of Saxo trader site is very slick so I am in agreement with those who have already posted.
I do have one issue at this early stage, it was my understanding that the trading was effectively inter-day and no real long term positions are taken.
However, only one position has been taken so far - effectively a short on the NASDAQ - it was very profitable early evening yesterday, however, the position has not been closed and running as we speak.
The position has not been closed in the evenings and has been running at least two days?

17th Jul '21

Most positions do last for days rather than weeks, although I'm yet to see the strategy perform with real volatility and suspect some positions may stay open for longer.

19th Jul '21

Thanks again for your input Philip999 - I am now starting to see lots intra day trades - however so far the wrong call is being made - for example going short on an index which has already gone down significantly - which goes up after the trade - the trade is squared off at a loss. Interestingly the fund does not do well in July - so maybe I should have invested later?

20th Jul '21

Hi Letap73,

Just picking up on your message below. I've been keeping an eagle eye on strategy over the past few weeks, all positions are made with a super tight stop and it is somewhat frustrating to watch. Can't help but feel the right call is being made but with not enough breathing space to mature into a profitable trade.

That being said, historic returns are really very good and I'm certainly not a day trader so will continue to watch with interest, certainly until year end as I expect volatility to pick up during q4.

I'm find the strategy is somewhat struggling for direction and that really mirrors the wider market at the moment, easy covid gains have come and gone. The next 6 months looks difficult to predict, taper talk is round the corner and good news = bad news, i.e taper. Furlough coming to an end and US stimulus cheques running out, oh and the German election which means any EU policy is on hold until late September. That being said, retail and consumption looks pretty healthy.

I'm just really struggling to see a cohesive outlook ahead and I'm holding a high cash balance at the moment. It's one of the reasons I'm happy with the long/short strategy that can pick any choose opportunities without my input. Current drawdown is the worst the strategy has had in over 2 years.

29th Oct '21

Footnote to this page, just had a note from Saxo saying they are putting their Macro Discretionary and Macro FX funds on “reduce only” status, i.e. not taking any more funds into these positions. Existing positions can be kept open (for the time being) and no reason given as to why this is being done. YTD my position is down about 9% after being up about 4% at one point. Intend to keep it going as an alternative investment to regular equity/fixed income holdings.

20,000% return in 10 years! long/short everything strategy.

Unlock the rest of this article with a 14 day trial

About the Author

Philip999

42 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...