congratulations on the launch of your
offshore fund. Can you give us a brief
introduction on your key investment
decision-makers and their backgrounds?
On 1 September, we launched Orbix
Emerging Trends LP, a programme for
trend-following in the emerging economies
for offshore investors. AUM of Orbix
Emerging Trends is US$5 million at
launch. The fund has an emerging market
scope with a Brazil-focus. Wave-trends
in the emerging markets have historically
had a different behaviour as compared
to those in G7 markets, wherein most
trend-following funds tend to trade
the same trends. Because of the low
correlation between emerging markets
instruments and G7's, Orbix will reduce
the correlation in existing G7 trend-following
funds in an investor's portfolio.
The managers are:
Alexandre Bourgeois is a director
of Orbix Global Partners Ltd. A trend-follower
since 1994, Alexandre founded Orbix
while managing his own investments.
Alexandre pioneered the trend-following
strategy in emerging markets and was
the first trader to use it in Brazil.
Alexandre's primary responsibilities
are programme research and development,
and risk control.
Prior to Orbix, Alexandre founded
and served as CEO for iConexa SA,
a software company based in Brazil,
from 2000 to 2001. Prior to iConexa,
Alexandre was the founding partner
of AAA Asset Management, a Brazilian
hedge fund. From 1997 to 1999 Alexandre
was a managing director of Banque
in São Paulo.
From 1995 to 1997 Alexandre was a
partner of the Bear Fund, a London-based
hedge fund. Prior to the Bear Fund,
Alexandre was at Bear Stearns Inc
in New York, from 1991 to 1995, working
for the international proprietary
desk where he held several positions
trading Argentina, Brazil, Chile,
Colombia, Mexico, Peru, Venezuela,
Hong Kong, Indonesia, Malaysia, Thailand
and South Korea.
Alexandre has a BS in mathematics
from Geneva University (1990).
Alexandre is a registered fund manager
at the Brazilian Comissão de
Valores Mobiliários and a member
of the sub-committee of hedge fund
regulation of the Brazilian Association
of Investment Banks and Securities
Dealers (ANBID). Alexandre is also
a director of Orbix Global Partners
Administração de Recursos
Ltda and Xibro Axia Administração
de Recursos Ltda, both companies incorporated
Cassio Lopes is a director of Orbix
Global Partners Ltd. Cassio's primary
responsibilities are trading and middle-office
Prior to Orbix, Cassio held several
positions of responsibility. From
2000 to 2002, Cassio was a director
of Bank of America, responsible for
its Latin American sovereign debt
trading. From 1999 to 2000, he was
a VP at J.P. Morgan & Co - Brazil,
in charge of fixed income trading
in São Paulo. From 1996 to
1999, he was a VP at J.P. Morgan &
Co - UK, in charge of sovereign debt
trading in London for emerging markets
including Argentina, Brazil, Chile,
Colombia, Ecuador, Mexico, Panama,
Peru, Venezuela, Bulgaria, Croatia,
Poland, Russia, Algeria, Ivory Coast
and Morocco. From 1991 to 1996 he
was a foreign exchange trader at J.P.
Morgan & Co - Brazil in São
Paulo. From 1988 to 1991, Cassio was
a trader in gold and foreign exchange
at Citibank in São Paulo.
Cassio has a BA in economics from
Pontifícia Universidade Católica
in São Paulo (1991) and attended
The Morgan Finance Program in New
Cassio is also a director of Orbix
Global Partners Administração
de Recursos Ltda and Xibro Axia Administração
de Recursos Ltda.
Luciano Corrêa is a director
of Orbix Global Partners Ltd. Luciano's
primary responsibilities are fund-raising
and client relationship.
Prior to Orbix, Luciano was a founding
partner of Mídia Investimentos
in 1997, and consolidated the out-of-home
media industry in Brazil, through
Billboard Partners, a US$75 million
dedicated buy-out fund for the billboard
industry in Brazil. Prior to Mídia
Investimentos, Luciano held positions
at Brahma (now InBev), Brazil's leading
brewery, and GP Investimentos, the
leading buy-out firm in Brazil. Prior
to GP Investimentos, Luciano was an
associate at S.G. Warburg & Co
Ltd in London.
Luciano holds an MBA and a master
in international affairs from Columbia
University (1991) and a BA in economics
from Universidade de São Paulo
Luciano Corrêa is a board member
of Brasil Mídia Exterior. Luciano
is also a director of Orbix Global
de Recursos Ltda and Xibro Axia Administração
de Recursos Ltda.
How much of your portfolio,
on the average, is invested in Latin
America versus the rest of the world?
The focus is trend-following in emerging
markets, with particular emphasis
in the Brazilian markets.
Although Orbix has the ability to
trade all markets that comprised the
Investment Universe (financial instruments
of 19 emerging countries), the Brazilian
markets play an important role in
the trading strategy. One important
objective of Orbix's programme for
the Brazilian markets is to try to
reduce the correlation between the
traditional existing G-7 managed futures
funds and Orbix, so as to reduce the
correlation in investors' current
allocation to the CTA or emerging
markets strategy in their portfolios.
Because of the low correlation of
the Brazilian markets Orbix trades
versus the "traditional"
G-7 instruments, Orbix believes the
partnership can reduce the correlation
to existing managed futures or emerging
markets funds in an investor's portfolio.
Is there a difference in portfolio
construction for your onshore and
The onshore fund is a CTA investing
in the commodity markets normally
traded by traditional CTAs, financial
instruments of G7 countries and financial
instruments of Brazil. We are offering
it to Brazilian investors who seeks
diversification away from emerging
What are your views on the
Latin American economy and how does
that impact your fund?
Our views on Latin America and on
Brazil's economy do not impact the
trading of Orbix. We are trend-followers
- what we don't do is to predict trends.
The foundation for Orbix's analysis
is the study of market prices, rather
than market fundamentals or the prediction
of trends. Orbix's investment philosophy
has been based on the assumption that
market prices, rather than market
fundamentals, are the key aggregator
of information necessary to make investment
decisions and that market prices,
which may at first seem random, are
actually related through time in complex,
but discernable ways.
This philosophy is based on analysis
of historical data that revealed that
market adjustments sometimes form
price trends that can be exploited
for profit. Orbix believes there is
an inherent return opportunity in
participating in trends which its
systematic and analytic models have
identified. Orbix's trading programmes
may participate in either rising or
falling trends; they do not have a
directional bias nor do they try to
forecast or predict market turning
points. Once Orbix has established
a position in a market that has been
identified as "trending",
no pre-set price target for profits
is established given the highly variable
nature of trends.
Orbix's understanding of the nature
of markets is based on the hypothesis
that investors' expectations adjust
at different times and manifest themselves
in long-term price trends. Markets
do not adjust immediately to new information.
The investment decision process has
been designed to analyse and exploit
these trends. Orbix's maintains the
view that market prices initially
react to new or emerging information
or events, but the aggregate impact
on price may be a lengthy process.
While prices may at first represent
an over- or under-reaction to new
information, prices eventually will
reflect all relevant information.
In other words, anything that could
possibly affect the market price of
a financial instrument - including
fundamental, political, or psychological
factors - eventually will be reflected
in the price of that commodity or
instrument. The foundation for Orbix's
analysis is, therefore, a study of
market price, rather than market fundamentals
or the prediction of trends.
Orbix believes that the price adjustments
process takes time, since reactions
of market participants to changing
market dynamics initially may be inefficient;
that is, investors may not react immediately
to information because of differing
evaluation processes, differing levels
of risk tolerance, or uncertainty.
Gradual price adjustments manifest
themselves in long-term trends, which
themselves can influence the course
of events and from which profit opportunities
can arise. Orbix believes that such
market inefficiencies can be exploited
through a combination of trend detection
and risk management.
Trend-following models determines
crucial decisions such as:
- How and when to enter the market?
- How many contracts to trade at
- How much money to risk on each
- How to exit the trade if it becomes
- How to exit the trade if it becomes
How do you determine investment
How do you determine which
markets to trade?
Market selection then becomes a function
of four key factors: volatility, reliable
historical database, liquidity and
Liquidity is a key aspect to the
selection, as the nature of the trend-following
strategy demands the ability to enter
and exit markets without causing disruptions
Market organisation is another important
aspect, as markets that have organised
future exchanges, usually provide
clearer rules, stronger operating
procedures and higher leverage than
those over-the-counter markets. Brazil's
futures exchange, Bolsa de Mercadorias
& Futuros (BM&F), is the world's
fifth largest futures exchange by
number of contracts and the leading
futures exchange in the emerging markets.
The market selection and the determination
of the financial instruments that
comprise the investment universe is
not fixed and changes over time, as
the Brazilian markets, and the emerging
markets in general develop, and as
liquidity increases and organisation
improves. It is possible that markets
cease to be part of the investment
universe, as sometimes, certain markets
suffer lack of liquidity or undergo
periods of disorganisation and unrest.
- How volatile are the interest
rates in 2005 as compared to the mid-90s?
Current interest-rate environment
in Brazil is less volatile - approximately
four times - than in the mid-90s.
Do you think the growth in
non-fuel commodity prices, as seen
in 2004, is sustainable in the years
We do not predict prices - we follow
- Do you see a further decline
in inflation rates in 2005?
We do not predict inflation - we
follow it. However, it seems that
as far as Brazil's economy is concerned,
current market expectation is that
it should remain flat at approximately
4-6% per annum.
- What are the macroeconomic risks
in Latin America in 2005?
Currently the macro risks have been
Structurally the free-floating of
the currencies reduce border risk
as the central banks do not have to
intervene as much. If the Latin American
economies continue to integrate in
a free trade zone with the United
States, those risks are going to be
reduced even further. The more integration,
the lesser the macro economic risks.
On balance of payments, which is
another aspect under high scrutiny,
trade balance is strong.
On the political front, democracy
seems to be well established and the
voters - in all Latin American countries
- have showed a trend to abandon "messianic
leaders" and concentrate on the
rather laborious activity of actually
running the countries with hard work.
- In your opinion, do you think
your counterparts in Latin America will
be launching offshore vehicles?
Yes. Recent market studies show that
offshore funds are more competitively
structured to take advantage of market
opportunities as they, in general,
do not have to follow as many regulatory
limitations as the onshore funds.
How is your capital raising
process going? Are there any travel
plans dedicated to fund-raising in
the near future?
The investor base for systematic
trend-following is clearly offshore
as this is a new strategy for most
Latin American-based investors. Meeting
investors face-to-face is a natural
aspect of our business. We do travel
frequently - as often as one week
a month in New York and London.
- How do you find Brazil as a
base for hedge fund managers?
Very competitive for emerging market
- Do you think there will be
substantial growth in the Latin America
hedge fund industry?
Unlikely in the near future for onshore
funds but this is more likely for
offshore funds. The growth in Brazilian
investors' allocation to alternative
investments in onshore funds in general
seems dependent on a significant reduction
of the local interest rate, currently
at 19.75% per annum on sovereign debt.
In Mexico, growth of the AUM of hedge
funds seems dependent on the enactment
of a new regulatory framework.