The Alternative Investment Global Foreign Exchange Strategies

Transcription

1 The Alternative Investment Global Foreign Exchange Strategies Increasing Returns While Lowering Risk Presented to AAII National Conference November 10, 2007 David Johnson, CTA AAII Member/Speaker

2 U.S. Government Required Disclaimer - Commodity Futures Trading Commission Forex, Futures and Options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex, Futures and Options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell Forex Futures or Options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this presentation. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE Hypothetical or simulated performance results have certain limitations unlike an actual performance record; simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Global Disclaimers The included performance figures are no guarantee of future results and should not be interpreted as a forecast of future performance. We make no promise as to the performance of the account and while the investment objective is major capital appreciation over time no representation is being made or implied that any account shown will or is likely to achieve the profit or loss shown. Investors should appreciate that due to the volatile nature of the currency markets, the value of your investments can decrease as well as increase and, as such, funds invested should constitute risk capital. With aggressive trading, while profits can be substantially losses can be much greater too. The distribution of this material may be restricted by law in certain jurisdictions. Persons accessing these and the other pages are required to inform themselves about and observe any such restrictions. The content of this prospectus and its attachments are neither an offer nor a solicitation of an offer to sell investments in any jurisdiction in which such an offer or solicitation is not lawful or in which the person making such an offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. You should seek independent advice as to your suitability to speculate in these markets if you are at all unsure, as well as confirming the legal and tax and accounting characteristics and consequences, of the transaction and that you are able to assume those risks. Global Capital, LC and its trading companies make no representation as to the accuracy or completeness of any information contained herein or otherwise provided. Any person placing reliance on this prospectus to undertake trading does so entirely at their own risk and NCP does not accept any liability as a result. Forex, Securities and Derivatives Markets may be subject to rapid and unexpected price movements and past performance is not necessarily, or to be interpreted as such, a guide to future performance. 2

3 What is Forex (For( Foreign Exchange) change)? Largest Market in the World by 3 times all others Combined Almost $2 TRILLION USD Traded Daily (NASDAQ trades a small $11B) You invest in one country s currency getting stronger against another Example: Buy Long EUR/USD, you expect Euros to become worth more than US dollars Forex trading is in Lots where each lot is $100,000 US Dollars One lot can be bought with only $1000, providing leverage Market is so large, it reduces the cost of investing No one entity can manipulate it One Day of Volume It It is is estimated that that 70% 70% of of Bank Bank Profits Profits are are made made in in Forex Forex 3

4 A Chart is a Chart Exit REWARD Entry RISK As a Stock Chart Entry at , Exit at (0.678% Gain $100,000 = $ Gain) As a Forex Trade on the USD/JPY Pair Same Entry and Exit, Same Investment Size using 10-1 leverage $100,000 = 790 Pips X $8.58/PIP = $6, (6.78% Gain) 4

5 Your Money Works 132/wk vs. 32/wk Forex trades 24 hours a day, Monday through Friday Trading begins in Sydney, Australia at 5PM EST on Sunday Trading ends at 5PM EST on Friday The LONDON session is the highest volume session Begins at 2 AM EST, ends at 11AM EST Part of the reason is that the most active currency pairs have European components EUR/USD, GBP/USD, USD/CHP This time zone difference & 24 hour cycle makes the Forex hard to trade without a team of traders and computers 5

6 Why is FX Important in Your Portfolio? Forex returns are uncorrelated with the Stock Markets A combined portfolio of Stocks & Forex has Higher Returns with Less Risk Forex provides better opportunity for higher risk/adjusted returns Using leverage and proper position sizing, gains of 3-5% per month are achievable with reasonable risks The cost of trading Forex is much lower than trading stocks Less Cost, More Profit Much lower cost than retail clients in Forex or Stocks Buy/Sell $1,000,000 for $50 (0.005% of investment) Stocks typical cost > 0.52% or 104 Times Higher Our Forex access has zero slippage Forex Forex has has many many advantages over over stocks stocks & bonds bonds alone alone 6

7 Leverage Varies between Markets With a $25,000 account: Stocks - Maximum size is $50,000 (2-to-1) Futures Maximum size is $250,000 (10-to-1) Forex Maximum size is $2,500,000 (100-to-1) The Leverage defines the MRP (Max Reward Potential) The Forex market provides the most Leverage & Return Archimedes ( B.C.) A greek mathematician and inventor, who wrote about geometry and mechanics. He said give me a lever long enough and a place to stand and I can move the world. Proper use of Leverage Creates Wealth 7

8 Pay Lower Taxes on Forex Gains 60% of Total Yearly Gain taxed at the Long Term Capital Gains Rate (Now 15%) Remaining 40% of Gain taxed at your tax rate Results in a 30% savings on taxes for equivalent returns in Forex versus in Stocks NOTE: You should consult your tax advisor regarding any tax matters. Global Capital, LC is not a tax advisor. 8

9 Adding Uncorrelated Markets Improves Investment Quality a portfolio with the greatest risk and least returns was comprised of 100% stocks and bonds and 0% managed futures a portfolio comprised of 80% stocks and bonds and 20% alternative investments (Forex) exhibited the greatest returns and least risk. Source: Barclay Trading Group Ltd., Managed Futures: Barclay CTA Index; Bonds: Lehman Brothers Long-Term Treasury Index; Stocks: S&P 500 Total Return Index 9

10 More Reward with Less Risk To Increase Return & Decrease Risk, Trade Uncorrelated Markets Almost all stocks are strongly correlated together Bonds are also correlated strongly with Stocks Exposure to investment vehicles not correlated with Stocks lowers your overall risk, increasing your risk adjusted returns Your Portfolio should have some or all of the following: Stocks & Bonds Foreign currency (Forex) Real estate 10

11 Benefits of Forex in Your Portfolio It is the largest market in the world Economies of Scale reduce costs of trading; little manipulation It is a 24 hour/day, 6 day/week market (No Surprises) Money works longer (132 hrs/week versus 32 Hours for Stock Market) It trends better than Stocks Trends are where the big money is made It is less volatile than stocks (less risk) [Cleaner signal] averages 1% per day range It affords greater leverage than Stocks [More Gain] vs. 2-1 Investment Gains are taxed at a lower tax rate than Stocks 60% of Gains taxed at 15% LTCG Rate (Versus your marginal tax rate) It has no correlation to the Stock Market, and is much less emotion-driven than the Stock Market; driven by fundamentals Reduces your overall portfolio risk, and may increase portfolio return Many advantages make Forex a Good Addition 11

12 Benefits of Portfolio Diversification Investment Advisors have always advocated diversification Most investor portfolios are heavily concentrated in the stock market and/or the bond market Concentration in Mutual Funds is especially problematic Most of the 8,000 mutual funds are highly correlated to each other and the market Due to fees and costs, and unproven strategies, over 90% of Funds do not beat the major indices Protecting yourself from the risks associated with investment concentration is important to your financial well being The world s largest market the Foreign Exchange (Forex) market - is ideal for accomplishing these goals Forex is not correlated to the stock market, providing true diversification to lower your overall investment portfolio risk Superior returns than the stock and bond markets Profit regardless of market direction (no Bear Market) Forex Provides Many Benefits to Investors 12

13 Don t t Try This at Home! Forex investing is dominated by International Banks, Multi-National Corporations, Government Central Banks, and other large Institutions Direct access to large liquidity pools is important to long term profitability Normally not available to retail investors The most successful firms have staffs of mathematicians, computer programmers, and experienced market professionals that have worked for the world s premier FX market makers Better to to Leave This This to to the the Professionals 13

14 What is a Private Managed Account? We assist you in opening a brokerage account with our designated Forex Broker No different than a Stock Brokerage Account except that it s for trading currency lots instead of stock share lots This is YOUR Private Account No one has access to the funds but you Monitor your account 24/7 online You grant Global Capital a LPOA (Limited Power Of Attorney) to only make trades in the account on your behalf Global Capital has NO Access to your brokerage account funds You can rescind the LPOA at any time and withdraw all your funds Global Capital s Team of Professional Institutional Traders work tirelessly to grow your equity Individual, Joint, IRA, Corporate, and Trust accounts are available Unprecedented Access to Professional Talent 14

15 Better Than a Hedge Fund GCI Managed Account GCI MANAGED ACCOUNT Complete Visibility of Trades Rescind LPOA anytime Minimum Investment of $25,000 Withdraw money end of any month Access to Two Independent Funds for $50,000 Funds held by Gov t Regulated & Licensed Broker (Gain Capital) HEDGE FUND No Visibility into Investments or Trades Rescind LPOA Quarterly Typically $500,000 Minimum Investment Withdraw money end of any quarter Access to Two Independent Funds for $1M Funds held by Unregulated Hedge Fund Entity Many domiciled offshore All the Advantages None of the Disadvantages 15

16 Benefits of the Global Capital GCI FUND Unique access to not one, but two independent proprietary asset management companies Manage their own money and institutional money (and ours) Two completely different styles provides further diversification Invest like a hedge fund, but without the restrictions Minimum investment $25,000 You only pay for performance (No fee charged on assets) No co-mingling of funds (Your own managed account) All accounts receive the same fills on trades You can withdraw at the end of any month 16

17 Experienced Human Specialists VS Computers RRB Fund (Chicago) Technical & Fundamental Trading Short Term & Intermediate Term Strategies Specialists trade One Currency in One Direction Creates natural Hedging Advantages Thrive in Quiet markets Extremely Low Volatility in Returns No Negative Years Average AROI of 28.40% JLA Fund (NYC) All Trading done by computer algorithms Dozens of short and intermediate term systems All systems run all the time Proprietary algorithm dynamically allocates capital to strategies, currencies, and time frames Advantages Thrive in Volatile markets Moderate Volatility in Returns No Negative Years Average AROI of 31.82% The The Whole is is Greater than the the Sum of of the the Parts 17

18 Asset Allocation is the Key to Success RRB Fund Traders do the trading Manager allocates funds to individual traders (currencies) Allocation Strategy is proprietary Partially based on algorithms Partially based on Manager s experience JLA Fund Computers do the trading Team of mathematicians & programmers devise strategies & supervise Allocation Strategy is proprietary Dynamically moves assets between different strategies, currencies, and time frames Risk Control is is a Key Measure in in Calculations 18

19 Performance of Each Fund Compared % JLA & RRB Yearly Returns 80.00% 60.00% 40.00% 20.00% 0.00% JLA Fund RRB Fund RRB Average JLA Average JLA FUND Average Yearly Return 31.82% RRB FUND Average Yearly Return 28.40% Past Performance is not necessarily an indicator of future results 19

20 Performance of the GCI FUND GCI FUND PERFORMANCE GCI FUND - GROWTH OF $100,000 60% $1,000,000 50% 40% 30% 20% 10% $800,000 $600,000 $400,000 $200,000 0% YEAR $ YEAR GCI FUND Average Yearly Return 31.68% Past Performance is not necessarily an indicator of future results 20

21 Global Capital Investments Market Access Deal with a large liquidity pool on Interbank Market Most major banks make a market Goldman, UBS, RBS, HSBC, Deutche Bank, SaxoBank, B of A, Citi, JPM, Leyman Deal only in Block Orders Client Accounts allocated in Back Office (avoids slippage) Much lower cost than retail clients in Forex or Stocks Buy/Sell $1,000,000 for low as $ % of investment Stocks typical cost > 0.52% or 104 Times Higher due to commissions, spread and slippage 21

22 What is the Best Feature of a Managed Account? We make our money the old fashioned way We earn it! When you make money, we make money Average Returns of 31.68% per Year were Net to the Client Performance fee of 20% of new equity high profits is collected monthly Global Capital is only paid the performance fee if your account is at a new all time high There is NO FEE on assets under management Pay for Performance A real Incentive 22

23 What is a Principal Protection Account? We use secured investments to eliminate the final risk element 65% of your equity is invested in the Global Capital Account; 35% used to insure against any principal loss in Initial Investment If Global Capital sees a 60% drawdown remainder is returned to the client and principal shortfall is completely returned in no more than 5 years (100% whole) Advantages: Keep 65% of Investment Gains Eliminate all risk of loss to principal Protects against any loss of Principal 23

24 Managed Account Benefits Summary Superb Returns greater than 31% per year We make your money work for you 24 hours a day, 5 days a week Our Strategies provide higher returns with lower risk Lowers your Portfolio Risk by Diversifying into other Markets Not a Hedge Fund with limited withdrawal capability Funds are held in Your Private Brokerage Account (transparency) No co-mingling of funds Funds can be withdrawn or added only by You Pay for Performance Choose Highest Return > Standard Account Setting Lowest Risk > Principal Protection Contact us today to help you get started Investment Accounts Setup in in 2 Days IRAs in in 1 Week 24

25 To contact us by Phone or TOLL FREE Direct Get complete information at: 25