“Largest financial market in the world”
Investments in currencies offer a very wide range of activities, says Jannis Raftopoulos from JRC. The liquidity is immensely high, you can trade around the clock and manipulation and the misuse of insider knowledge are practically impossible.
MONEY ° : What does JRC stand for, what is the focus of the investment philosophy?
JANNIS RAFTOPOULOS : The JRC Capital Management GmbH was founded in 1994 in Berlin. As an innovative financial services provider, we specialize in quantitative investment strategies in highly liquid markets. This particularly includes the currency market. Together with well-known partners such as banks, universities and financial companies, we have been involved in numerous EU research projects since 1996. The goal is to develop profitable quantitative trading systems that will exist in every market phase. The result of constant research and the practical implementation of the latest findings in empirical capital market research, risk management, chart analysis and behavioral finance has been successful quantitative trading for ten years.
MONEY ° : Can you briefly explain your quantitative investment strategy in the currency segment?
JANNIS RAFTOPOULOS : Our concept is based on the combination of different trading strategies. The results of years of research and development work are linked to principles of technical analysis. The bottom line are algorithms that are regularly statistically evaluated and monitored. In addition, there is strict risk management for the individual models and at the portfolio level. In addition, when putting together the model portfolio, we pay attention to diversification in three respects: the least possible correlated currencies, the use of as different trading approaches as possible and the use of different time horizons.
MONEY ° : What advantages, opportunities, but also risks do investments in foreign exchange hold?
JANNIS RAFTOPOULOS : The foreign exchange market is the largest financial market in the world and is characterized by its high level of liquidity. Trading currencies has the advantage that you can trade around the clock. Another advantage is that manipulation is practically impossible. Because that would require a financial volume that is likely to exceed that of the central banks. There is also no knowledge that insiders can benefit from. Furthermore, currencies hardly correlate with other financial instruments, such as stocks or bonds, and are therefore ideal for diversification. Of course, the forex market also harbors various risks. The large number of market participants and the short response times possible thanks to modern technologies sometimes lead to strong price fluctuations in one day. It is precisely in this fact that, on the one hand, the particular attractiveness of foreign exchange trading lies, on the other hand, it is also risky. There are also numerous economic, social and political factors that need to be kept in mind. For example, an increase or decrease in the country-specific key interest rate can cause large fluctuations.
MONEY ° : What is the current portfolio composition of the JRC Global Currency?
JANNIS RAFTOPOULOS : The portfolio of the JRC Global Currency consists essentially of the most liquid currency pairs, the so-called majors. They make up about two thirds of the total daily turnover on the foreign exchange market. In addition to the US dollar and the euro, this also includes the Japanese yen (JPY), the Australian dollar, the New Zealand dollar, the Canadian dollar, the Swiss franc and the British pound. With the recovery of the oil price we should see a recovery in the petro-currencies. This means, for example, the Russian ruble or the Norwegian krone. The euro should also continue to offer interesting opportunities. That depends largely on whether the ECB’s quantitative easing program takes effect. The depreciation of the euro should lead to an economic recovery in the euro countries in the medium term.
MONEY ° : How will things go with the euro?
JANNIS RAFTOPOULOS : The development of the euro depends heavily on economic and political developments in the euro area. In my opinion, Greece’s exit is rather unlikely, but a possible Grexit is still on the table. The elections in Spain are also explosive. If rising inflation expectations continue to feed, the current weakness in the bond and equity markets could persist and the euro would continue to rise. Otherwise we expect a range against the dollar of 1.15 to parity over the next few months. Against the Swiss franc, the ratio should level out between parity and 1.10. We do not see any stronger appreciation of the franc below parity.
The interview was conducted by Money magazine . Author: Harald Kolerus