Feast and famine in signal frequency
The frequency of signals per calendar year has ranged from 60-70 times in 2019 down to only 8-9 times in some other years. Since the signal has a very high hit rate, its frequency also quite accurately predicts the overall level of profits and the first year of the strategy, 2019, has been the best calendar year to date.
Performance drawdowns have been very small and only occurred once every 2 or 3 years. Ascinaa has a worst drawdown of 0.89% between February and March 2021, which was less than its annual volatility of 1.54%, while Oceanaa, which runs at four times higher volatility, correspondingly has roughly four times these metrics: a worst drawdown of 3.99% over the same period, which is also less than its annual volatility of 5.55%.
Round turns per million average 1,500 in a busy year for the lower volatility strategy Ascinaa and 6,000 for Oceanna, but they will vary dependent upon the number of signals annually.
Selecting pairs from the five
Even when the signal is activated for some currencies, the stars are virtually never aligned for all of them. Very seldom does the strategy have simultaneous exposure to all five currency pairs. Around 80% of the time it is in only one pair, and 20% of the time it may be only in two or three of the pairs. “We always trade the pair with the highest probability of best positive capture during the expected move,” says Delahunty. Holding periods can range from intraday to 20 days and most trades are between intraday and 5 days.
Scaling, take profits and stop losses
The strategy tends to scale in and out of trades once moves become dynamic.
The signal predicts a minimum level of potential profit, and trades might be exited after this initial target is attained. The amount of profit beyond the minimum target does vary. “Sometimes we will stay in the trade after the minimum level is met, even though the probability of further profits has declined,” says Delahunty.
Levels of exposure and stop losses vary: “We may sometimes trade very low margin to equity and keep a very tight stop loss,” says Delahunty.
Trend agnostic
Unlike some currency managers, Delahunty does not fret about a lack of trends or volatility in currency markets. He has observed the signal occurring during trending, range bound and mean reverting currency markets, and believes the strategy is unique to the foreign exchange markets he trades against the USD.
Statistical not economic
The approach is based on statistical probabilities but at a relatively digestible level as no machine learning, statistical learning, AI or generative AI is used.
“It is a mathematical model, rather than a global macro strategy,” says Delahunty. No fundamental or economic data is used, though Delahunty does closely monitor currency market reactions to economic data releases in terms of how prices move relative to the data. He sticks to his circle of competence as defined by the signals: “Even if I had a hypothesis about economic data, I would not trade it because I am not an economist”.
A rare find
Divining the secret sauce of the signal sounds like finding a golden needle in a haystack and the painstaking research involved a considerable amount of trial and error. “The biggest problem was seeing patterns emerge that only worked for a short period. We might have categorised 200 movements and find 199 of them have a very low probability of positive capture,” says Delahunty.
Data inputs cover a range of shorter term and higher frequencies. Data used can be high to low ranges, for periods including open to close, four hourly, hourly or even down to tick levels. “It is price data rather than price action in a true sense over many periods. We know what starts to happen when certain criteria are met,” says Delahunty.
Strategy risk targets
The Ascinaa G10 Currency Futures program runs with volatility of 1-2% and an average margin to equity of 1-4% while the Oceanaa G10 Currency Futures program simply has four times the exposure of Ascinaa: volatility of 4-8% and an average margin to equity of 8-16%. Fees are calibrated to the volatility target: Ascinnaa charges 0.25% management fee and Oceanaa 1%.
The minimum account size of USD 330,000 for Ascinaa is based on contract sizes for currency futures. The minimum account size for the Oceanaa is USD 82,500 or one quarter of the level. For notionally funded accounts the minimums can be lower, though Senaca do recommend certain minimum levels of funding.
Investor base
The strategy is currently marketed to US investors. The investor base includes funds of funds, high net worth individuals and family offices, as well as a Chicago proprietary trading house. A $5 million ticket was garnered earlier this year taking assets to over $18 million.
Delahunty is exploring various platforms for asset raising and could consider launching a fund as assets grow.
Operations, service providers and regulation
Certified Public Accountant (CPA) Lisa Casagni manages operations. She is also Delahunty’s wife, and the two worked successfully together for many years in the marine systems business.
Service providers on the broker side include several US brokers active in the CTA space: StoneX Financial, Wedbush Securities and Straits Financial Group.
Senaca has offices in the UK and US. Regulation is typical for a CTA: NFA and CFTC. Assets are currently below the threshold for SEC registration.