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Digital Subscriptions > The Hedge Fund Journal > Issue 140 – Apr | May 2019 > Andurand Capital: Directional and RV Opportunities

Andurand Capital: Directional and RV Opportunities

Expanding menu of investor risk choices

To truly understand Pierre Andurand’s performance pullback in 2018, it’s necessary to look at his longer-term track record. Andurand Capital’s performance since February 2013 has earned it The Hedge Fund Journal’s CTA performance award for the discretionary commodity trading category.

This has been against a challenging backdrop for many peers in the space, some of which have shut down. Andurand’s personal career track record, dating back to 2004, includes his former fund, BlueGold, proprietary trading at Vitol, and a couple of short gaps. Taken together these three track records add up to average annual returns of just over 30%, which, if stitched together, would have compounded up to 3,109% as of the end of April 2019.

Moreover, the return profile has been asymmetric and positively skewed, hence the Sortino ratio – which focuses on drawdowns – is above two, and ahead of the Sharpe ratio, which penalises upside and downside volatility equally. This pattern comes from Andurand having often been explicitly long of options. Even when trading linear instruments, his style of risk management to some extent synthetically replicates the payoff profile of owning options. The portfolios are entirely liquid, so that risk can be swiftly cut when needed.

Risk management

The 20% loss in calendar year 2018 is, probabilistically, perfectly consistent with the strategy’s volatility of around 20% – it is clearly one annual standard deviation. By way of comparison, on a volatility-adjusted basis the 2018 loss is not dissimilar to the 2011 one (of 34%) at BlueGold. This was one factor leading Andurand Capital to institute a tighter risk management framework than the one used there.

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