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About Kaplan Invest – FX Asset Management

Summary: The Kaplan Invest FX program is a combination of both long and short-term trend-following styles in G10 currency pairs that use an algorithm to decide entry and exit points. The spotting of the trends themselves is discretionary based on models and the experience of the traders, taking into account fundamental macro-economic factors. Short-term trends are generally identified within a 10 to 30 day period. Long-terms trends can be identified anywhere from 6 month to 2 year periods. Once a trend is identified a trade will be entered at 1:1 with leverage increasing as the trade targets are approached, potentially up to 8:1 in extreme cases. If a trade begins to lose at 1:1 it is taken off immediately. The program uses trailing stops. Average trade length is 5 to 21 days. Trades are taken off at the end of the month to realize gains (or losses) and then reinitiated at the beginning of the following month if still viable. The program will not trade if none of the currency pairs show any opportunity.
Kaplan’s AUM are currently $5MM. Minimum account size is $100K USD. The largest intra-month drawdown has been 7.5%, however, recovered to realize a drawdown of 4% for that month. It’s best month was a gain of 34%. Leverage can be used to trade this account with an agreement of account parameters in place which can be modified according to client. There is no lock-up and fee structure is 1X30. Of note is that in 2009 the head trader, Umit Nakas, traded the program more conservatively than normal due to lack of liquidity.

From Website:


Kaplan Invest offers comprehensive strategies in currency trading with varying degrees of risk and liquidity which utilize a wide variety of G10 currency cross pairs and investment techniques.

The objective is to attain a high level of total return as may be consistent with the preservation of capital.

The strategy invests primarily in G10 currencies.

The currency fund strategy objectives depend on the specific requirement of the client. A series of strategies offer differing risk/return parameters ranging from an incremental return of 12% (net of fees) to high double-digit returns in the range of 70% to 99%. Outperformance targets and tracking volatility are adjusted according to specific client needs.

Investments are possible via customized segregated mandates or via investment in our managed fund. We offer the same level of investment expertise as a segregated mandate or currency managed fund.

Kaplan’s philosophy emphasizes that economic fundamentals are difficult to forecast and near impossible to model. Judgment is a pattern recognition exercise which is generally contemporaneous with fundamental news rather than predictive. Discernable trends in foreign exchange market exist and they are driven by shifting fundamental themes.

We adapt a dynamic market observation which involves identifying market parameters, analytics, and fundamentals.

That leads us to judgment based currency approach. Over time we have accumulated models, systems, formations, patterns that result in behavioral and psychological approach of currency markets.
Filtering these factors from analytical, technical and fundamental perspective at specific time frame of the market would result in decision making process.

Foreign exchange market often leads fundamental data or may even be unrelated to such data in the short to medium term (up to 2/3 years). Fundamental analysis helps maintain confidence in a current market trend. Horizon should be dictated by the frequency of release of fundamental information which may affect confidence in the current trend.

Our judgment based process evaluates economic and currency factors and weighs them versus market valuation on an ongoing basis with high emphasis on risk control and diversification is key elements to process.

We are using mathematical models to spot market trends.

Long term trends greater than 30 days and short term trends between 5 to 25 days.

Strategic position changes imply horizon of about 1 to 3 months, meanwhile tactical position changes imply adjustments every week. We evaluate the market in terms of variables such as market sentiment, risk aversion measures, economic news and data, and interest rate differentials. Systematic review of economic environment results in valuation of current account, capital inflows, expected inflation, monetary and fiscal policy, expected economic growth, and official policy targets.

On-going risk control is critical due to unpredictable turning points in trends as well as choppy periods of limited directional movement.
Risk control is crucial in a judgment based currency approach process. We implement four phases of risk management.

1. Ex post: historical statistics for volatilities and correlations help calibrate risk units and an active risk budget for a target expected alpha
2. Ex ante: short term, ongoing forecast of return and risk based on themes determine actual active exposures.
3. Stop loss: predetermined mechanism for limiting the loss operates on any given single position and view.
4. Time: predetermined time intervals for given positions require expected profit accumulating before the maturity of specific time.