Successful investing is about managing risk,
not avoiding it.
Benjamin Graham
Benjamin Graham
Arbitrage is based on the idea that securities across different markets are often mispriced due to the underlying inefficiencies in market.
Arbitrage opportunities arise when there is either volatility or regulations which leads to dislocations and inefficiencies in market prices.
An arbitrage strategy attempts to exploit these inefficiencies by buying a market instrument at a low price and simultaneously selling the same or very similar security in the same or different market for a higher price, or vice versa. Importantly, you are not taking a view on the direction of the instrument, rather the view is on the difference or spread between the two prices.
Futures vs. futures
on a different exchange
Futures vs. forwards
Quanto futures
Exchange vs. over-the-counter options
Options vs. options on a different exchange
Vol Swaps, Var Swaps, VIX futures
Spot (cash) vs. futures
Quanto futures
Mergers and tender offers
Arbitrage is our preferred trade type and has contributed over 80% of our returns since inception
Allocation driven by capital availability & return considerations
Assessment of tail risks critical, and risk mitigation limits total positions
Consumes limited risk budget but lots of capital
Opportunities increase greatly during episodes of high volatility as dislocations increase
Analysis of fundamental factors to assess whether the spreads are sustainable / make you believe the trade will work
Market position, flows and price action considerations feed into the decision-making process
Statistical relevance of trade levels plays an important role
Relevant historical analysis of trade and interactions with portfolio and how things could be different
Consumers moderate to high-risk budget without being capital intensive
Expertise in the trade: the more knowledgeable we are, the larger the positions we are comfortable taking
Market features: we prefer markets which are liquid, tenors are shorter or settles in cash
Trade characteristics: implied carry gain/loss, statistical relevance, behavior in various markets
Current portfolio: diversification benefits, risk-reward at margin
An independent team looks at both operational and market risk
Periodic discussions and formal weekly risk management meeting with portfolio managers on positions and related market risks
| % MoM | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | - | - | - | - | - | - | 0.46 | 0.54 | 1.11 | 0.81 | - 0.30 | 0.89 | 3.56 |
| 2021 | 0.69 | 0.76 | - 0.17 | 0.03 | 1.38 | 0.02 | 0.69 | - 0.83 | 0.60 | 0.44 | 0.35 | 0.57 | 4.62% |
| 2022 | 0.03 | - 0.62 | 0.68 | - 0.13 | 0.46 | 0.78 | 0.49 | 0.76 | 0.52 | 2.18 | 2.06 | -1.69 | 5.61% |
| Fund Name | Pillar Arb Fund* |
|---|---|
| Fund Type | Collective Investment Scheme (Single Fund) |
| Docmicile | Mauritius |
| Currency | USD |
| Strategy | Low Risk Arbitrage |
| Minimum Investment | $100,000 |
| Asset Class | Forex, Equity, Commodity |
| Management Fee | 1.25% p.a.(accrued monthly) |
| Bloomberg Ticker | PIIGOAU MP |
| Performance Fee | 25% |
|---|---|
| High Watermark | Yes |
| Subscription Frequency | Monthly |
| Redemption Frequency | Monthly |
| Investment Manager | Pillar Investment Manager |
| Prime Brokers | ED&F Man Capital, Britannia Global Markets, CMC Markets UK |
| Auditors | Morison (Mauritius) |
| Fund Administrator | Apex Fund Services |
| ISIN | MU0660S00003 |
| Fund Name | Pillar Arb Fund* |
|---|---|
| Fund Type | Collective Investment Scheme (Single Fund) |
| Docmicile | Mauritius |
| Currency | USD |
| Strategy | Low Risk Arbitrage |
| Minimum Investment | $100,000 |
| Asset Class | Forex, Equity, Commodity |
| Management Fee | 1.25% p.a.(accrued monthly) |
| Bloomberg Ticker | PIIGOAU MP |
Now available
on
