"Stock market-like returns
with only minimal drawdowns –
not a contradiction"

Maik Kaminski: The Aquantum Active Range Strategy was developed with the goal of providing investors with a product that delivers stock market-like returns in both bull and bear markets – with very minimal drawdowns. Over the past 12 months, for example, we achieved a performance of +9.54% in our S share class, with a maximum drawdown of only -3.01% (as of 31 July 2024). We accomplish this through an options strategy that specifically leverages negative market fluctuations. The Aquantum Active Range Strategy is negatively correlated with the stock market, especially the S&P 500 Index. These characteristics make it highly appealing not only as a standalone product but also as part of a portfolio that includes equity investments. It can help significantly reduce overall portfolio volatility while maintaining upside potential.

How does your Aquantum Active Range Strategy differ from other options strategies in the market?

The Aquantum Active Range Strategy stands out primarily due to two distinctive features: a strong negative correlation with the stock market and active position management throughout the entire trading session.

We adjust the portfolio dynamically based on changing volatility levels. Our method is backed by extensive empirical studies on stock market history over the past 96 years. This knowledge helps us react very quickly to different market conditions, as the parameters of price development remain the same, regardless of technological progress.

Who is your strategy aimed at, and how do investors typically use it?

The Aquantum Active Range Strategy is fundamentally aimed at any investor seeking stock market-like returns with simultaneously low drawdowns. The strategy is particularly attractive for investors looking to diversify their portfolio by adding our strategy as a component to an existing equity portfolio. This allows investors to reduce portfolio fluctuations, increase the Sharpe ratio, and maintain upside potential.

Since the strategy can be used in many different ways, we have clients from nearly all investor groups: from family offices and wealth managers to institutional investors in the banking (Depot A and Depot B business) and insurance sectors. In just over three years since the launch of the UCITS fund – with Universal Investment as the ManCo – we now manage EUR 620 million.

How flexible is the Aquantum Active Range Strategy when facing unexpected market changes?

There was an event recently that demonstrated just how quickly the strategy can respond to changing market conditions. In early August this year, the VIX (volatility index) spiked disproportionately due to the unwinding of the yen carry trade, growing recession fears in the U.S., and a nearly 30% sell-off in the Nikkei by August 5.

Although the S&P 500 also fell by almost 8% during this period, in 2008 and 2020, it took a roughly 26% drop in the S&P 500 to reach a comparable VIX level.

Already on Friday, August 2, the VIX jumped 58% intraday to 29.66 points.

In the past, such extreme movements have often indicated that the market would open with a large gap on Monday, or the VIX would continue to rise significantly. Given this unusual situation, we quickly adjusted the portfolio for a ‘crash’ on Friday. However, the crash only occurred in the Japanese Nikkei on Monday. From August 7 onward, we rebuilt the portfolio back to normal.

How did you experience the VIX disruptions on August 5, 2024, and what impact did this event have on your strategy?

On Monday, August 5, the situation escalated dramatically. The VIX recorded the largest intraday increase in its history. The index rose from the Friday’s close of 23.39 to 65.73 points, an increase of over 180%, surpassing the 'Volmageddon' of February 5, 2018.

As mentioned earlier, we had already adjusted the portfolio for “crash scenario” on Friday, based on certain parameters. Our best-case range for the fund’s positioning, with options expiring on Friday, August 9, was between 4,400 and 4,600 points, approximately 14% to 18% below Friday’s closing price.

However, the payoff zone for these options started much earlier – at 5,140 points. This allowed us to calmly monitor the developments and focus on analysing the portfolio’s repositioning.