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FX MANAGERS

Interview with Michael Aronovitz

Manager of Gables Capital Management, Inc.

In this interview,  Michael underlines the importance of understanding key geopolitical events. He explains the company’s short term investment strategy and risk management policy.

 

FX Manager

Gables Capital Management, Inc. 

Strategy

Gables Capital – GCM Global FX

Location

Miami, FL.

Assets Under Management

$32m FX, $420m Firm Assets

Type

FX

Style

Short Term Discretionary

Instruments

FX

 Traded Currencies

100 %

 

fx managers short term strategy Michael AronovitzFXTM

How long have you been trading foreign exchange for? Tell us about your career evolution.

MA

I have been trading in the FX markets for nine years.  I began as a trader at Quest Partners, LLC, a systematic hedge fund firm in New York.  For three years I traded in the Asian, European and US time zone trading in the currency, equity, fixed income and commodity markets.  After a great experience with Quest, I decided to look for a position with a discretionary firm.  In 2005, I joined Ronin Capital Management, a discretionary global macro firm, as the head of trading and currency portfolio manager.  After four profitable years at Ronin, I joined Gables Capital and in February 2009 we launched GCM Global FX, which is a short-term discretionary trading currency managed account program. 

FXTM

What do you particularly like about your job?

MA

I love how interconnected the currency markets are to all global events and news on a daily basis. We literally watch history unfold before our eyes and weigh its potential effects on the financial markets. Each day there is something new to focus on. As recently as this past November, we were faced with renewed global tensions between North and South Korea, the European Union teetering on the brink of disaster, the impact of the US elections and the Federal Reserve began a new round of quantitative easing in hopes to lower unemployment and jumpstart the struggling economy.  Our job is to be aware and have a good understanding of all key geopolitical events in order to manage risk and protect our client’s capital.

FXTM

In what way is trading currencies different from trading other financial instruments?

MA

What I believe differentiates the currency market from other asset classes is its ability to encompass all asset classes into one.  Fixed income views can be expressed in the currency market as often times the currency market reacts to changes in interest rate differentials between countries.  Commodity views can be expressed in the currency markets through buying and selling the currency of countries which are rich in natural resources such as Australia, New Zealand, Canada, and Norway.  Over the past few years, the broader equity markets have been highly correlated to the higher yielding currencies such as the Australian and New Zealand Dollar.

FXTM

When was the company created?

MA

In 1997 Gables Capital Management, Inc. was founded as an SEC registered investment advisory firm by Eric McKenna and Judith Neiwirth. Prior to 2009, Gables was primarily focused in the fixed income and equity markets but after the extreme market volatility from 2005-2009, Gables was looking to diversify into other asset classes and trading strategies to help balance their clients portfolios.  My integration into the firm was a very natural fit for all parties as Gables added access to the currency markets along with a shorter term, and more nimble trading strategy.  While from my perspective, I was joining a firm that was well capitalized, has a solid long-term reputation and a strong proven track record, which post 2008, was not easy to find.

FXTM

How is the company  structured?

MA

We currently have one office in Miami, Florida on Brickell Avenue, with a head count of six employees.  We service clients both domestically and internationally.

FXTM

Which authorities regulate Gables Capital Management, Inc?

MA

The company is registered with the SEC and NFA.  Judith Neiwirth serves as our compliance officer and she manages the firm’s formal compliance program.  In staying abreast of the ever changing regulatory environment, Gables also employs the services of National Regulatory Services, Inc.  We find it increasingly important to be as transparent as possible for our current clients and potential investors.

FXTM

How would you describe your investment strategy?

MA

Our investment strategy is short term opportunistic trading with a high concentration on managing downside risk at all times.

Our objective is to achieve non-correlated (to equity and trend following strategies) returns through short term discretionary trading in the foreign exchange markets.  Our trading decisions are driven by monitoring the global macro environment, historical asset class correlations, changes in global interest rate spreads, market sentiment and positioning, central bank policy and economic data.  All trades should have a minimum risk to reward ratio of 3:1 and there are internal controls monitored by our risk managers to oversee maximum monthly loss and maximum gross exposure at any time.

FXTM

How and when did you develop your current FX management strategy?

MA

It began when I was a trader at Quest Partners rotating through all time zones getting a feel for what news, data, and events impacted the market at different times of the day.  Then once given the opportunity as a discretionary currency trader at Ronin, I was able to form my own short term trading strategy combining the skills I developed from the systematic side at Quest and the discretionary disciplines at Ronin. 

Being that the markets change every day, it is a constant challenge to get a feel for what is currently moving markets and identifying if that will be the case tomorrow. 

FXTM

How do you manage risk?

MA

We have a very high focus on risk at all times.  In my strategy we monitor risk on a per trade basis and we know at all times what our maximum loss is if the market moves against each of our positions.  On each individual trade we risk between .07 and .25% of our NAV.  We have firm stops in the market with banks so even in extreme market situations we know within reasonable slippage (under .1%) what our maximum loss is.  Additionally, Eric McKenna serves as risk manager for additional oversight.

FXTM

Under which market conditions do you get the best results?

MA

Typically we tend to do well in times of elevated volatility (Equity VIX in excess of 18 and EUR 1m vol greater than 11). Times of elevated volatility create increased trading opportunities and increased daily ranges, which are typically beneficial for my trading performance. We tend to underperform in times of declining volatility and a strong trend in the market place.

FXTM

What should an inexperienced trader watch when choosing the time frame to trade on?

MA

I think it is most important to size trades appropriately.  If you enter a trade looking for a multi month theme to develop in a currency, you need to place your stop loss a few percent away from the market or else you risk being stopped out with a loss while ultimately your longer term theme might be correct.  Conversely if you are looking for a day trade to make ½ of a percent, then don’t enter your stop loss two percent away as that does not make sense for a risk reward ratio.

FXTM

What is your forecast for the EurUsd, over the next 6/12 months?

MA

It is a very difficult time to forecast.  As we speak the EUR is under pressure in the mid 1.30’s for the second time this year on concern about the viability of Greece, Ireland, Portugal, Spain to survive and finance its debts.  At the same time the Fed recently announced its intent to engage in a further round of quantitative easing which is certainly dollar bearish.  These major market forces are the exact reason I am a short term trader and avoid focusing on the long term.  The one thing I have been telling my clients is that the slump in 2008 globally was synchronized.  The recovery is increasingly less so.  Currently the UK, US, EU and Japan are still relying on government support to aid their recovery while countries such as Australia, Canada, and Norway have began raising interest rates.  With such differentiation between each countries growth and future plan for monetary and fiscal policy, we anticipate that short-term volatility will remain elevated resulting in favorable trading opportunities in the coming quarters for short-term discretionary currency trading.