CTA Spotlight: Sigma Advanced
November 15, 2018
This month, Foremost Capital sat down with Trading Principal Carlos Arcila Barrera of Sigma Advanced for our CTA spotlight interview. Find out more about Sigma Advanced and what Carlos had to say below.
Carlos Arcila Barrera is the trading principal of Sigma Advanced Capital Management. The Commodity Trading Advisor became registered in September of 2017. He has been managing client assets since February 2016. The focus of Sigma Advanced is on commodity spreads including energies, grains, meats, metals, and softs.
Carlos holds his MSc in finance from the University of Notre Dame (Magna cum Laude) and B.S. in Business Administration from Universidad de Los Andes. He is a member of the International Association for Quantitative Finance (IAQF) and the American Finance Association (AFA); Carlos is a CFA Level III, CAIA Candidate, and has passed the Series 3 Examination (National Commodities Futures Exam).
Carlos has over seven years of derivatives trading experience across a wide range of commodity markets with a specialization in futures and spread trading. He is the Adjunct Professor of Derivatives Markets at Universidad de Los Andes, and Project Leader of The Financial Markets Research Center (CIMEF) at the University. In 2016, Carlos started the Global Advanced Futures and Spread program (GAFS). This program is for QEP investors only.
GAFS (QEP ONLY) is a diversified future and spreads program seeking non-correlated alpha returns across a wide range of economic cycles and market conditions. It uses a discretionary methodology for trade selection, timing, execution, and size but it uses highly quantitative and system-based modeling for strategy development.
The advisor also monitors fundamental data such as economic reports and schedules, which may affect existing and potential trades. The program follows its own set of rules as far as profit levels, a maximum number of markets it can be in at any given time and appropriate risk/reward per trade and it attempts to create a diversified portfolio of commodity positions and strategies. This program normally presents a low correlation with traditional investments, long-only commodity indexes, and other CTAs.
Robust quantitative risk management procedures are a crucial element in generating returns, and it is at the core of this program. The risk is actively managed through strict risk budget limits at the portfolio and individual positions drawdown limits. Likewise, the program follows Sigma’s internal Risk Management Policy Manual that includes the analysis of a variety of statistical risk models including a 95% and 99% VaR, Conditional VaR and Marginal VaR test to monitor the portfolio exposure as well as market stress tests. The risk is monitored on a constant real-time basis through electronic platforms and internal risk management systems. Please keep in mind that there is risk involved with futures and options and, therefore, may not be suitable for all investors, regardless of the risk management strategy employed.
Sigma Advanced Capital Management incorporates a multi-strategy model approach to implement its trading ideas. A systematic analysis of spreads data and discretionary trading seeks to capture opportunities in the changes of the term structure of commodities. These strategies are implemented following a diversified risk factor portfolio approach and strict quantitative risk management that gives the program an edge to benefit from the distortions, inefficiencies and seasonal patterns in the commodity markets.
Given the nature of the commodities, the term structure presents inefficiencies as well as identifiable seasonal patterns. First, commodities are affected by cycles of supply and demand, harvest time, increases in consumption and production on specific dates and weather patterns that create seasonality. Second, the commodities index funds create distortions in the curve when those funds are required to roll the multi-billion dollar positions. Third, the need for hedging by big commodity traders and companies creates impacts on the term structure when companies decide to make an essential hedge of the commodity price risk. Likewise, commodity markets can present explosions in volatility that could make outright futures and spread prices deviate several standard deviations from the mean, creating an irregular price action that affects the behavior of the term structure.
Statistics and Performance Capsule Stats
Compounded Annual Rate of Return: 14.63%
2018 YTD Return: (0.05)%
Largest Monthly Drawdown (04/16): (12.97)%
Peak to Valley Drawdown (02/16-04/16): (15.96)%
View tear sheet for full performance. This program has less than three years performance.
Carlos started Sigma Advanced Capital Management inspired by the Greek letter Sigma (σ) that represents the volatility in the markets. He created this CTA with the mission of offering an advanced risk management opportunity for his investors.
Carlos enjoys sharing his passion for the markets with his students as a professor of derivatives and capital markets at the Universidad de Los Andes in Bogota, Colombia. In 2018, he was nominated by Portfolio, a financial newspaper, as one of the best finance professors in Colombia. Other than being a lifetime learner in finance, Carlos likes to learn about quantum physics.
Apart from his academic pursuits, Carlos has many other personal interests. He enjoys playing a wide range of musical genres on his guitar and piano from classical to rock. On weekends, Carlos doesn’t mind getting in a round of golf to relax. He’s currently residing in Bogota, Colombia but he frequently travels to his favorite American city, Chicago.