Experience Meets Innovation
TARO® is an algorithmic and systematic investment strategy that aims to exploit inefficiencies in the markets. The strategy is the result of years of quantitative research and market experience. TARO® uses unique techniques developed by FALGOM AG that are applied to futures in different asset classes.
Although each of these markets has its own characteristics, the algorithm is identical for each financial instrument. Furthermore, exactly the same logic is used to enter into both long and short positions. Which makes TARO® – in combination with its countertrend approach – a genuinely market-neutral investment strategy.
TARO® comfortably outperforms traditional and alternative benchmark indices [on a risk-adjusted basis]. The return from TARO® is superior to the gains made by major equity indices, whereas its risk profile is similar to that of government bonds.
TARO®’s proprietary approach means that returns are completely uncorrelated to other assets. This makes it an ideal form of diversification for any professionally managed portfolio because it reduces volatility and drawdowns.
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The entire investment process is fully automated. This eliminates emotion-driven decisions, which have been shown to detract from investment performance. The strategy is executed on a stress-tested IT infrastructure with built-in redundancy. Within this setup, we have implemented our independent, multi-layered risk management framework that oversees the trading activities in real-time.
«Algorithms win because the same inputs generate the same outputs every single time. They don’t get distracted, they don’t get bored, they don’t get mad, they don’t get annoyed. And they don’t fall prey to the litany of biases that humans do.» Daniel Kahneman
The returns generated by TARO® are completely independent of the performance of the equity or bond markets. The strategy is to screen markets for investment opportunities with an appealing risk-return ratio, based on a pattern recognition algorithm. This algorithm is universal, which means it is identical for any futures contract, and even long and short positions are handled using exactly the same logic. This allows us to generate pure alpha returns that add real value to our clients’ portfolios as they do not correlate with the markets being traded.
«Alpha is the holy grail of asset management: uncorrelated excess returns generated by investment skill.» Larry E. Swedroe
TARO® generates stable returns, but has performed the best when markets are volatile. Investors tend to change their positions more frequently during these periods, which creates inefficiencies and offers opportunities for TARO® to exploit. Most investments tend to suffer during periods of heightened volatility, which makes TARO® an efficient stabiliser of wealth for the majority of institutional portfolios.
«Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same, the antifragile gets better.» Nassim Nicholas Taleb
The algorithm is designed to automatically adapt to a changing environment. This includes not only short-term changes in market characteristics such as volatility, but also longer-term structural changes. The benefits are consistent returns and an algorithmic ability to exploit inefficiencies over the long term.
«It is not the strongest of the species that survives, nor the most intelligent. It is the one most adaptable to change.» Leon C. Megginson