CTA Spotlight: ArchSight Capital Partners, LLC
January 18, 2019
Father-son duo Mike Tang and Eric Tang, founders, and trading partners of ArchSight Capital Partners, LLC gave us the inside look at their trading platform and philosophy. Learn more about their Prometheus Trading Program, backgrounds, and what inspired them to begin trading below.
Their trading program started as a platform for investing their own money and managing the investments of family and friends. They have been managing client assets since October 2015, but the seeds for ArchSight Capital were formed much earlier, in the midst of the 2008-2009 financial crisis. Mike was dissatisfied with the performance of his 401(k) due to the limited choices offered by his company-sponsored retirement plan, many of which (i.e. mutual funds and other funds with competitive long-term returns) were heavily correlated with the stock markets and suffered steep declines in 2008-09.
Using his 10+ years of experience trading options, Mike designed an options strategy during the recession that would later become the foundation for ArchSight Capital. After years of refining the strategy using his personal funds, Mike saw an opportunity to create an investment company when he left Bank of New York Mellon.
Meanwhile, Eric specialized in analytics and risk management, holding several roles across multiple industries that used quantitative analysis to manage uncertainty. Prior to ArchSight Capital, Eric advised the hedging portfolios for large utilities within the energy sector. Eric believed his risk management expertise would be well-suited for creating an investment firm focused on providing stable returns and low volatility.
In 2015, Mike and Eric decided to form ArchSight Capital to offer an alternative investment option designed to produce stable results, even during downturns in the stock markets. The flagship product, the
Prometheus Trading Program, was originally created to manage the cash and retirement accounts for a small group of family and close friends. After establishing a solid track record for Prometheus, Mike and
Eric officially registered ArchSight Capital as a CTA in April 2018 and it was at that time that they opened up the trading program to additional investors.
In August 2018, ArchSight Capital launched a second trading program (Abacus), which has more conservative return goals and a more stringent risk management approach than Prometheus. Abacus is geared toward investors who are more risk averse and prioritize an investment objective centered around volatility. Below is a comparison between the two trading programs:
The ArchSight trading philosophy is grounded on the primary objective of capital preservation and appreciation. ArchSight uses a disciplined, systematic investment approach with the goal of achieving consistent monthly and annual returns that are uncorrelated with the stock, bond, and commodity markets. Since the inception of the Prometheus Trading Program (October 2015 to December 2018), the monthly correlation with the S&P 500 Index has been 0.073 and the AG CTA Index is 0.004.
The ArchSight trading programs use a variety of proprietary option strategies, which mostly consist of ratio spreads on different futures products. ArchSight uses technical and fundamental analysis for each
product to develop a market forecast, which provides a high-level guide for the desired positions.
ArchSight then conducts a quantitative analysis of market option prices to determine the optimal entry point (strikes, ratios, price, time until expiration, etc.) for those desired positions.
ArchSight’s edge is based on three factors:
1) Proprietary trading strategy
2) Advanced risk management procedures
3) Broad market sector diversification.
First, our proprietary, systematic trading strategy finds and executes positions aimed at generating positive returns. Second, our developed risk management procedures make refinements to continuously optimize positions from entry until liquidation in order to produce low volatility. Finally, ArchSight trades a mix of equity, bond, and commodity products to achieve portfolio diversification and reduce correlations with any one particular market sector. These factors, in combination, make the ArchSight trading programs a unique investment opportunity.
The ArchSight trading programs use proprietary risk management procedures to constantly refine and
optimize positions and ensure the proper amount of risk over the course of the position. From the time a position is entered, the trading programs will make refinements to the initial positions based on the price movements (or lack thereof) of each product until the liquidation or expiration of the positions. By continuously optimizing our positions over the lifetime of an option, the trading programs avoid large
losses (while also forgoing large monthly gains). The goal of this risk management strategy is to produce a consistent range of positive monthly returns, with very low levels of volatility.
Statistics and Performance Capsule Stats
Program Minimum: $100,000
Prometheus December 2018 Return: -0.35%
Prometheus 2018 Return: +19.49%
Compounded Annual Rate of Return: 13.61%
Worst Peak to Valley Drawdown (10/16-11/16): -2.73%
View tear sheet for full performance.