Financial Markets Dynamics - RCM trust.pdfVIP

Covering Letter We argue that our Financial Markets Dynamics methodology generates above average and persistent Alphas (in line with the Top 5 hedge funds) starting from a very effective structure of risk control. This structure excludes, inter alia, most of the controversial characters of alternative management styles, such as leverage, investments in exotic derivatives and poorly liquid markets, market exposures earthquake insurance, opacity and difficulty to timely compute portfolio’s value. In fact, anticipating a probable restrictive regulation that could demand structural changes for models used till now. The 2008 performance, as a brutal reshaping of the financial industry takes place, shows the strength of our methodology: the FMD annual return has been positive and nearly 52%. Despite well-known financial markets’s complexities, we show that a finite number of dynamic regularities are observable and can be and used to anticipate market movements, permitting to build effective active strategies for managing funds. To show how our FMD methodology works, we exemplify three major market dynamics for 11 US futures markets over their entire life-span. A strategy built on such dynamics and on a set of consistent decision rules forms the core of the FMD model. Evidence of its power to interpret real market dynamics has been produced following two steps. We have first validated the FMD model via a real time certified portfolio management simulation, where our trading operations, including orders’ modifications, are recorded in the official Audit reports from a major international Brokerage House. Adopting the industry’s best practises, a back-testing analysis has then been employed to build the FMD’s tra