1. SGMT Capital Research Inc.
SYSTEMATIC GLOBAL MARKETS TREND
DECEMBER, 2016
Trumponomics – A new era of economic dynamics to come
Investor Letter
The SGMT trading system had a gross return of -0.44% for Level II in the month of December, 2016
Source of Returns by Currency (December, 2016):
2016 Gross Returns by Month:
Level II Month Ccy Change SGMT Gross Return
Australian Dollar (AUD) -2.33% 2.66%
Canadian Dollar (CAD) -0.07% 0.41%
Swiss Franc (CHF) -0.18% -1.23%
Euro (EUR) -0.63% -0.63%
Great Britain Pound (GDB) -1.45% -1.45%
Japanese Yen (JPY) -2.09% -0.11%
Total Level II -0.44%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
0.07
%
12.80
%
5.39% 5.38
%
-6.22% -1.54% 5.83
%
-3.93% 3.17
%
-2.77% -9.18% -0.44 6.73%
2. The markets in December continued their positioning into Trumponomics without any sign of fears . The1
Fed lifted the key interest rate as expected on December 14 and the tone of the Fed Chairwoman
conference clearly moved to indicate possible faster rate hikes together with FED dots predicting 3 hikes
in 2017 as a result of the Trump presidency’s policy orientation. Trumponomics became the dominant
factor to drive the markets instead of the FED and was still far from clear. Market participants expressed
different and even opposite views as Trumponomics is being developed and the Trump cabinet choices2
seemed to incline a hardline and a conservative orientation in economic and trade management.
In December, SGMT strategy lowered its effective leverage from average 3.62 to 1.8 without resorting to
the 18% risk control trigger given the murky status of Trumponomics. Generally, the market information3
captured by SGMT continued to indicate the prospects of inflation and the risk of high volatilities to
come, more or less in line with the bond markets. As of December end, SGMT positioned in low leverage
and roughly dollar neutral.
Looking back to the year of 2016, SGMT model had performed well in the early part of the year as the
FED held back from rate hikes in a slowing US economy, and oscillated with an un-trending economic
cycle since May 2016. The Brexit in June hit a market unprepared for such a political risk. SGMT risk
control successfully fended off the Brexit risk. After Brexit, it seemed that the market psychologies
became fragile against any traditional fundamentals and risks. Such market psychology reached its climax
with the Trump-election as some markets totally disregarded the fears about the Trump risks that carried
right into the Trump win (see SGMT November Investor Letter). SGMT sided more in line with the bond
markets as the Goldman analyst pointed at (see footnote 2) and suffered a setback to its 2016 performance
in an environment where macro strategies were the worst-performing according to a Bloomberg report .4
Looking forward, the prospects of Trumponomics are still in an early stage of development. The overruns
of some markets and inherited risks may shape up a period of volatile markets going forward along with
the development of Trumponomics and geopolitics vs the growth prospects (see SGMT November
Investor letter). Along with the Trump presidency, the Brexit will also come to play in the first quarter of
2017. Best Wishes for the New Year
Please refer to November SGMT Investor Letter.1
Bloomberg, “Goldman Says Bonds, not Stocks, Have Properly Priced In Trumponomics”, by Luke Kawa;2
“Trump Administration ‘Hell-Bent’ on Making Big Changes, Dalio Says”, by Bei Hu
Refer to November SGMT investor letter.3
Bloomberg, “Hedge Fund Winners and Losers Emerge as Year ends on Better Note”, by Katia Porzecanski, Nishant4
Kumar and Bei Hu
3. SGMT is a systematic FX trading strategy, so it might be useful to compare our returns to our peers and
similar competitors. The BTOP index is an index of other foreign exchange managers as provided by
BarclayHedge.com. The following table shows the SGMT Capital vertical comparison statistics to the
BTOP index components sourced from barclayhedge.com.
!
Fund Name (SGMT As of November-2016) 2016 2015 2014
Annual
Ret Inception Sharpe Maxdown
Alpha vs
SP500
Beta vs
SP500
SGMT (Net) 2.21% 18.64% 25.27% 15.36% May-14 0.91 19.93% 1.362 -0.04
SGMT (Gross) 7.20% 23.16% 32.90% 21.73% May-14 1.12 18.29% 1.846 -0.04
Alder Capital (Alder Global 20) -3.84% -3.27% 1.15% 5.55% Feb-01 0.27 28.51% 0.56 -0.01
FDO Partners, LLC (Emerging Markets Quant. Currency) -8.27% -2.37% 1.98% 0.34% Jul-01 -0.38 12.62% 0.02 0.02
First Quadrant L.P. (Tactical Currency Allocation L/S USD) 7.00% -1.53% 1.08% 1.90% May-95 -0.11 6.72% 0.18 -0.01
Harmonic Capital (Currency 10v) -7.66% 7.91% 10.45% 3.90% May-03 0.30 16.73% 0.27 0.11
Harness Investment Group Limited (FX) -4.27% -3.64% 8.28% 5.12% Apr-09 0.49 13.52% -0.15 0.48
P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.05
Premium Capital Advisors AG (Premium Currencies) 1.87% 5.22% 5.16% 3.50% Jan-04 0.32 14.51% 0.40 -0.13
Quaesta Capital AG (v-Pro Volatility) -3.51% 20.08% 1.00% 5.38% Jul-07 0.82 9.39% 0.50 -0.08
Salix Capital UK Ltd. (FDFX) -20.38% 13.50% 10.82% 5.06% Jan-11 0.48 15.58% 0.63 -0.15
Rhicon Currency Management (Pte) Ltd (Strategic) -4.33% -3.33% 8.25% 4.40% Jan-04 0.44 11.74% 0.40 -0.03
Investment Capital Advisors LLC (ICA Managed Accounts) 21.85% 266.22% 26.02% 72.09% Nov-10 0.74 29.65% 7.77 -0.92
Alternative Asset Management Ltd (ACMP (Long Only)) -9.65% 48.45% 122.39% 57.06% Sep-12 1.38 4.35% 8.87 0.32
Quaesta Capital AG (v-Pro Dynamic Volatility) -4.23% 43.36% 2.58% 10.30% Jul-07 0.87 17.98% 0.96 -0.14
CenturionFx Ltd (CENTURIONFX - 6X) 16.69% 39.44% 36.21% 50.90% Jan-06 1.99 21.60% 3.88 -0.20
24FX Global Advisors Ltd. 69.69% 27.81% 26.94% 28.86% Jan-01 1.54 19.28% 2.25 0.03
Hong Investment Advisors Ltd (HCM Rapier FX Index) -4.03% 25.32% 8.64% 8.92% May-13 0.71 13.55% 1.02 -0.24
AE Capital Systematic FX Fund 4.58% 19.35% 5.74% 13.69% Oct-12 1.66 6.51% 1.11 -0.01
P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.05
Salix Capital UK Ltd. (FDFX) -20.38% 13.50% 10.82% 5.06% Jan-11 0.48 15.58% 0.63 -0.15
Sequoia Capital Fund Management LLP (Systematic FX) -8.35% 12.97% -9.14% 5.25% Jun-11 0.53 19.09% 0.45 0.02
Investment Capital Advisors LLC (ICA Managed Accounts) 21.85% 266.22% 26.02% 72.09% Nov-10 0.74 29.65% 7.77 -0.92
First Quadrant L.P. (Tactical Currency Allocation L/S USD 20%) 34.08% -12.19% 4.18% 6.76% Feb-11 0.33 31.76% 1.43 -0.71
Alder Capital (Alder Global 20) -3.84% -3.27% 1.15% 5.55% Feb-01 0.27 28.51% 0.56 -0.01
TMS Capital Ltd (Arktos GCS II) 6.89% -5.78% 3.83% 3.81% Feb-10 0.47 10.15% 0.39 -0.05
IPM Informed Portfolio Mgmt. (IPM Systematic Curr. A) 11.05% 2.56% 7.01% 4.55% Apr-05 0.36 14.97% 0.55 -0.20
P/E Investments (FX Strategy - Aggressive) 8.79% 13.82% 49.08% 13.10% Oct-03 0.58 33.33% 1.16 0.05
24FX Global Advisors Ltd. 69.69% 27.81% 26.94% 28.86% Jan-01 1.54 19.28% 2.25 0.03
Currency Insight Ltd (Global Currency Program) 0.76% 4.56% 2.24% 6.67% Jan-02 0.52 11.57% 0.61 -0.03
Ortus Capital Management Ltd (Currency - Aggressive) 4.44% 0.87% 18.71% 12.09% Mar-04 0.40 52.79% 1.17 0.17
Traub Capital Management, LLC (FX Strategy Fund I) 6.28% 9.39% 30.98% 5.55% Mar-11 0.32 22.87% 0.95 -0.39
Source BarclayHedge.com for other funds and SGMT Capital Inc. as of November 2016 (red colored marks discountinued or no-updated funds)
SGMT Performance Statistics As of December 31, 2016
SGMT (Net) 1.75% 15.34% 25.27% 14.67% May-14 0.86 19.93% 1.269 -0.04
SGMT (Gross) 6.73% 19.73% 32.90% 20.81% May-14 1.07 18.29% 1.753 -0.04
BTOPFXIndexComponentsasofNovember-2016
Year2015TopRankedCTACurrencyProgramsasofNovember-2016
January2016MonthlyTopRankedCTACurrencyasofNovember-2016