A managed futures delta neutral strategy to yield … managed futures delta neutral strategy to...

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A managed futures delta neutral strategy to yield positive alpha for investors

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The information contained in this document does not constitute in any manner any investment advice or solicitation or endorsement relating to the

products mentioned herein ("Products"). The Products may not be suited to all categories of investors and hence Investors/Recipients must make their

own investment decision (at their sole description & risk) and where necessary take advice from independent professional advisors before investing.

Investors/Recipients are (1) not provided any guarantee/assurance that the investment objective of the Products will be achieved; and (2) not offered

any guarantee/assured returns on their investments in the Products.

Investments in Quantitative products/strategy are subject to market risks due to various micro and macro factors and forces affecting the capital

markets which include price fluctuation risks. The investments may not be suited to all categories of Investors/Recipients. As with any investment in any

securities, the value of the portfolio under products/strategy can go up or down depending on the factors and forces affecting the capital market. The

investment objective of the Samssara Capital Technologies LLP is to construct an optimally focused portfolio of large cap securities to significantly

outperform NIFTY-50 Index with the risk lesser than the benchmark (NIFTY-50).

samLongShort is only the name of the products/strategy and does not in any manner indicate either the quality of the products/strategy or its future

prospects and returns. The past performance of the strategy and/or its back-tests is not indicative of future performance. We have taken responsible

measures to ensure the accuracy of the information provided in this document. Trading in the off-exchange market is very speculative in nature,

involves considerable risks and is not appropriate for all investors. Therefore, before deciding to participate in off-exchange Foreign Exchange trading,

you should carefully consider your investment objectives, level of experience and risk appetite. Investors should only use risk capital when trading in

capital markets because there is always the risk of substantial loss.

The Portfolio Manager, its affiliates/associates, their directors, employees, representatives or agents shall not be liable or responsible, in any manner

whatsoever, to any Investor/Recipient or any other person, for the performance/profitability/operations of the products/strategy, the contents of any

document or any investments in the products/strategy including any and all direct, special, punitive, indirect, or consequential damages (including lost

profits), even if notified of the possibility of such damages.

samLongShort strategy is not sponsored, endorsed, sold or promoted by National Stock Exchange Limited (“NSE”).

Disclaimer & Risk Factors

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The Mandate

Yield positive alpha for the investors

Yield absolute returns irrespective of the market direction over a long term

Generate consistent returns with low volatility and significant sharpe

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About Us

COMPANY BACKGROUND

Samssara Capital Technologies LLP (“Samssara”) is an

investment solutions firm focused solely on developing

automated algorithmic and quantitative trading and

investment strategies

It was launched in 2010 by a team of IIM Ahmedabad and IIT

Bombay graduates - Rajesh Baheti, Manish Jalan and Kashyap

Bhargava

Samssara caters to its clients' needs of providing an

alternative asset management vehicle, with the focus on

100% automated and quantitative trading strategies

The team at Samssara works on mathematical models and

statistics that identify repetitive patterns in equity, commodity

and currency markets

The addressable market for Samssara is global - as the firm

can develop and build models which can function in both

developing markets with limited competition and developed

markets with strong competition

Samssara’s client base includes the leading international and

domestic banks, international and domestic stock brokers,

family offices, corporate treasuries and HNIs

PRODUCTS OFFERED

Samssara’s products vary from pair trading (statistical

arbitrage), factor models, Nifty Index beating products to very

high frequency trading strategies

One of our key products samLongShort – A quality dollar

neutral long short strategy on Nifty stocks and Nifty futures,

to generate consistent returns irrespective of the market

direction.

Our other product offerings include samCAP – a systematic

portfolio management on large cap stocks with dynamic

hedging and samTREND - a trend following strategy in

equities, commodities & currencies

Other products offered include samTREND - a trend following

strategy in equities, commodities & currencies and samWILLS

– a long-short strategy based on statistical arbitrage

Samssara also develops in-house products which are used by

HNI’s, corporate treasuries, prop houses of brokers, hedge

funds and investment banks globally who wants an alternative

vehicle for investment apart from equities and fixed income

The products are designed to generate consistent returns and

ride the volatility of the markets with systematic approach

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Our client base

Corporate Treasuries / Family Offices / Stock Brokers HNIs (Individuals)

Millennium Stock Broking Pvt. Ltd.

HNIs and executives of

corporates like:

Leading Private Equity firms

Promoters of manufacturing

and services industries

Large financial services

MNC

CEO of a leading KPO

Bombay Gas Co.

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Manish Jalan

Director Manish is the director and chief strategist of the company. Prior to

being in India, Manish was a quantitative equity Trader in Tokyo, with

Merrill Lynch Prop Desk for over 4 Yrs where he played a vital role in

development and implementation of various factor models and

high/medium frequency trading models, which contributed

significantly to the prop desk profitability. Manish has worked closely

with more then 5 Indian broker shops and numerous International

banks in algorithmic trading, high frequency trading, statistical

arbitrage, quantitative modeling, back testing, programming, statistical

analysis and risk handling. Manish is a B.Tech and M.Tech from IIT

Bombay in Mechanical Engineering.

Kashyap Bhargava

VP, Strategy Development Kashyap is a B. Tech. and M. Tech. from IIT Bombay and specializes

in development of automated quantitative trading strategies. He has

around 7 years of trading experience in Indian Markets and has been

developing medium/low frequency trading strategies. He has also

worked at the proprietary trading desk of G.H. Financials as a

derivative trader for 2 years developing trading strategies for US, UK

and European Fixed Income and Equity markets.

Rajesh Baheti

Director Rajesh is the incubation partner and director of the company. Rajesh,

brings with him more then 15 years of experience in trading India

markets. He is currently the director and founding member of

Crossseas Capital Services (One of the first clients of Samssara).

Rajesh established Crossseas in 1995 and since then has been

instrumental in providing consultancy to clients in shares, bonds, stock

etc. Crossseas currently operates 5 offices in Mumbai and several

others across the country. Crossseas provides solutions in systematic

trading opportunities to selected clients in India and abroad. Rajesh

holds a PGDM from IIM Ahmedabad.

Tarun Soni

VP, Business Development Tarun leads the business development initiatives at Samssara. Prior to

this, he worked with investment banking team at Anand Rathi Advisors

for two years. He also worked with the investment banking team at

Avendus Capital for three years and with Bank of America back office

for one year. He has a strong experience of working on successful

mergers & acquisitions and private equity syndication transactions

across various sectors. Tarun is a B. Tech. from IIT Bombay.

The Team

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samLongShort – Product details

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Basic Methodology

Long

Short

a

Portfolio selection

• 100% quantitative ranking and scoring of Nifty-50 stocks from

Rank 1 to Rank 50 done on the 1st of every month

• Portfolio is constructed in two steps :

• Taking long positions in the top 10 ranked stocks

with an equal weightage of 10% assigned to each of

the top 10 stocks

• Taking short positions in Nifty futures of value

equivalent to 100% of the long portfolio

• The re-balancing of the stocks portfolio is done at the beginning

of every month

• The idea is to generate consistent and less volatile alpha over

Nifty, which results into attractive returns with low risk when

run on a 2x leverage

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OPTIMIZED BETA

SHORT TERM

TEMPORARY UNDER-

PERFORMERS

LONG TERM

OUTPERFORMERS

High ranked future outperformers

Uses the short, medium and long term outperformance and underperformance of each stock in Nifty-50 to

calculate the ranks

Stocks with long term outperformance and short term temporary underperformance is given higher weight

Proprietary statistical and quantitative techniques are used in ranking mechanism to further reinforce that the

short term underperformance is temporary in nature

Portfolio return optimization techniques are used for optimizing the beta of the portfolio

Ranking Mechanism

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Capital protection

The Long-Short strategy ensures protection of the capital irrespective of the market

movements

The protection to the capital stands at the “core” of the strategy

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Considerations Approach

Back testing Mechanism

• 10 years of back testing from 2001 to 2010

• Tracking changes in Nifty50 stocks over the last 10 years

• Methodology tested across varied market conditions

Live Market Testing • Daily tracking of the NAV and portfolio returns

• Monthly ranking, optimization and re-balance

Portfolio Selection • Uniform ranking mechanism

• Top 10 stocks are selected

Portfolio Re-balance • Beginning of every month

Portfolio constituents • 10 stocks long from Nifty50

• Nifty futures short to the 100% of long portfolio value

Portfolio Weight • Equal weight for all stocks at 10% for the long portfolio

• 100% weightage to Nifty futures for the short portfolio

Back Testing and Live Market Approach

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Back-test based on realistic scenario

• Slippage and Transaction Cost @ 50 BP

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Year on Year Performance Chart against NIFTY50

Note: ▪ Historical return generated by back-testing

▪ Slippage & Transaction Cost @ 50bp

17.4%

63.1%

26.0%

-3.2%

12.3%

28.6%

17.3%

78.2%

57.7%

-15.7% -15.0%

4.2%

69.4%

10.2%

32.3%

39.1%

50.3%

-48.6%

68.4%

16.8%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

samLongShort Nifty50

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Year on Year Performance Chart against NIFTY50 (table)



Year NIFTY50 samLongShort (2x Leverage)

2001 -15.0% 17.4%

2002 4.2% 63.1%

2003 69.4% 26.0%

2004 10.2% -3.2%

2005 32.3% 12.3%

2006 39.1% 28.6%

2007 50.3% 17.3%

2008 -48.6% 78.2%

2009 68.4% 57.7%

2010 16.8% -15.7%

Average 22.7% 28.2%

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Nifty50 samLongShort (2x Leverage)

Average Monthly Return 1.6% 2.1%

Volatility in Monthly Returns 7.9% 6.6%

Monthly Sharpe 0.2 0.3

Average Yearly Return 22.7% 28.2%

Volatility in Yearly Returns 37.2% 29.8%

Annual Sharpe 0.6 0.9

Total Months 120

Total Performing Months 73

Percentage of Performing Months 61%

Performance Metrics

SAMSSARA DISCLAIMER: PERFORMANCE DEPICTED ABOVE IS BASED ON THE BACK TESTED MODEL PORTFOLIO CONSTRUCTED USING THE

PROPRIETARY QUANT STRATEGY. BACK TESTED MODEL PERFORMANCE IS NO GUARANTEE OF FUTURE RETURNS OF THE CLIENT PORTFOLIOS

AND ACTUAL RETURNS OF THE PORTFOLIO MAY DIFFER FROM THAT DEPICTED ABOVE.



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Terms Futures Equity (2x Leverage)

Minimum Capital Investment Rs. 100 Lacs

Equity Exposure Rs. 200 Lacs (2x Leverage)

Nifty Futures Hedge Rs. 200 Lacs (2x Hedged)

Annualized Return (excluding FD returns) 28.2%

Annualized Volatility 29.8%

Annualized Sharpe 0.9

Peak to Trough Drawdown* 25%

Peak to Trough Drawdown on Capital* Rs. 25 Lacs

Transactions Costs + Slippage 50 bps

Recommended Account Types Client accounts (Managed Futures)

* Based on back-test results from 2001 to 2010

Futures Exposure in Equities

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Live Performance

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SAMSSARA DISCLAIMER: PERFORMANCE DEPICTED ABOVE IS BASED ON THE LIVE PORTFOLIO MANAGED ON SAMLONGSHORT STRATEGY. THE ACTUAL PERFORMANCE MAY VARY FROM CLIENT TO CLIENT BASED ON CASH/FUTURE POSITIONING, EXECUTION METHOLOLOGY AND EXECUTION TIMINGS.

2011 – Monthly NIFTY50* samLongShort

(2x Leverage)***

Jan – 2011 -12.0% 1.1%

Feb – 2011 1.9% -0.7%

Mar – 2011 5.5% 2.8%

Apr – 2011 -2.1% 3.2%

May – 2011 -1.9% 1.4%

Jun – 2011 0.6% 1.7%

Jul – 2011 -2.0% 0.0%

Aug – 2011 -8.6% -4.2%

Sep – 2011 -3.8% 6.0%

Oct – 2011 8.42% 5.9%

Nov – 2011 -6.1% 5.5%

Dec – 2011 -6.1% -5.3%

Total -24.7% 17.8%

Outperformance over Nifty Index 42.5%

* Nifty returns are calculated from 1st day of current month to 1st day of next month ** All portfolio re-balances and return calculations are done on 1st trading day of every month *** 2X Leverage on stock futures, data includes F&O prices, rollover prices and transaction costs (transaction costs: 20 bps)

Live Performance

2012 – Monthly NIFTY50* samLongShort

(2x Leverage)***

Jan – 2012 12.9% 18.0%

Feb – 2012 2.0% 4.4%

Mar – 2012 -0.4% -0.1%

Apr – 2012 -1.5% -0.8%

May – 2012 -7.6% 4.9%

Jun – 2012 9.0% 3.3%

Jul – 2012 -0.7% -3.4%

Aug – 2012 0.3% -5.1%

Sep – 2012 8.6% 6.6%

Oct – 2012 -1.3% -3.0%

Total 21.8% 25.3%

Outperformance over Nifty Index 3.5%

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Comparison with Nifty50 Index


0

20

40

60

80

100

120

140

160

180

Value of Rs. 100 invested in samLongShort v/s NIFTY (Since Inception)

samLongShort Nifty50

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Performance in August 2012

Portfolio August 2012

Rank Long Stocks Return in August 2012 (%)

1 Mahindra & Mahindra Ltd. 8.2%

2 Wipro Ltd 7.2%

3 NTPC Ltd 7.2%

4 Maruti Suzuki India Ltd 3.7%

5 Bharat Heavy Electricals Ltd -1.3%

6 Larsen & Toubro Ltd -1.4%

7 Bank of Baroda Ltd -5.9%

8 Hero MotoCorp Ltd -6.7%

9 Jaiprakash Associates Ltd -15.9%

10 Bharti Airtel Ltd -17.4%

Long Portfolio Return (On a 2x leverage) -4.5%

Return on Short of Nifty futures (On a 2x leverage) -0.5%

Costs 0.2%

Net Return of samLongShort for Month of August 2012 (On a 2x leverage) -5.1%


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Performance in September 2012


Portfolio September 2012

Rank Long Stocks Return in September 2012 (%)

1 Larsen & Toubro Ltd 18.6%

2 ICICI Bank Ltd 16.8%

3 Maruti Suzuki India Ltd 16.1%

4 Ambuja Cements Ltd 15.9%

5 Steel Authority of India Ltd 12.8%

6 ACC Ltd 11.7%

7 GAIL India Ltd 10.9%

8 Reliance Industries Ltd 9.4%

9 Bajaj Auto Ltd 9.0%

10 Bharat Petroleum Corp Ltd 3.3%

Long Portfolio Return (On a 2x leverage) 23.1%

Return on Short of Nifty futures (On a 2x leverage) -16.3%

Costs 0.2%

Net Return of samLongShort for Month of September 2012 (On a 2x leverage) 6.6%

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Performance in October 2012

Portfolio October 2012

Rank Long Stocks Return in October 2012 (%)

1 Infosys Technologies Ltd -9.3%

2 Hero MotoCorp Ltd 4.2%

3 HDFC -1.9%

4 GAIL India Ltd -10.6%

5 Bharti Airtel Ltd 4.9%

6 Reliance Industries Ltd -4.2%

7 Asian Paints Ltd -2.5%

8 Wipro Ltd -6.1%

9 Oil & Natural Gas Corp Ltd -5.6%

10 Siemens India Ltd -2.8%

Long Portfolio Return (On a 2x leverage) -3.4%

Return on Short of Nifty futures (On a 2x leverage) 1.3%

Costs 0.2%

Net Return of samLongShort for Month of October 2012 (On a 2x leverage) -3.0%


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Advisory Structure, Fee Structure & Risk Management

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Advisory structure

Client Broker Clients open a trading/demat

account directly with the broker

For samLongShort, Samssara acts as an advisor to its clients

The customer would open a broking/demat account directly with any of the brokers empaneled by Samssara

which would offer competitive brokerage rates that are pre-negotiated by Samssara

Samssara orders trades to the brokers on behalf of the clients. These trades are approved by the clients to

the brokers

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Details Terms

Quantitative Intelligence Samssara Capital Technologies LLP

Minimum Investment Rs. 100 Lacs

Prime Broker Contingent on the client

Fee Structure

Performance Fees:

• Management Fee: 0%

• Performance Fee: 20%*

• High Water-Mark: Yes

Statutory levies such as STT At cost

Average churning per year 8 times

Portfolio re-balance Beginning of every month

Hedging Anytime during the month

Subscriptions / Redemptions / Exit End of every month

NAV Reporting Daily

* Performance fee on the net profit generated. Net of all costs, not taxes

Fees Structure

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Risk Management

Sticking to absolute blue-chips and mega-caps stocks of Nifty50 portfolio

Large pool of liquidity available in Nifty 50 stocks and hence outperformance is not due to

liquidity premium in any stocks (Unlike in BSE 200 portfolio)

Diversified portfolio with weight in no stock exceeding 10%

Beta optimized in the portfolio to ensure that the excess return is not beta inclined

The shorting mechanism has the dual advantage of generating low risk returns on the

portfolio for clients

The fund has been designed to yield “consistent” returns for the investors irrespective of

the market conditions and hence providing them with an alternative and protected

investment vehicle for their investments

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Contact us

Head Office:

208/209, Veena Chambers 21 Dalal Street Mumbai – 400 001

Development Office:

207, Business Classic, Behind H P Petrol Pump, Chincholi Bunder Road, Malad (W) Mumbai – 400 064

For more information do visit : www.samssara.com

Manish Jalan

M: +91 98678 32726 D: +91 22 6748 7720 E: [email protected]

Tarun Soni

M: +91 98692 17190 D: +91 22 6748 7720 E: [email protected]

http://www.samssara.com/

mailto:[email protected]

mailto:[email protected]

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