Systematic Strategies LLC

Systematic Strategies is a New York City, NY based investment advisory firm founded by Dr. Jonathan Kinlay in April 2009 that operates algorithmic high frequency trading strategies across multiple asset classes. Systematic Strategies provides quantitative high frequency and algorithmic trading services in equities, fixed income, commodities, currency, and foreign exchange. Systematic Strategies has both a Managed Account Platform with execution through its affiliated broker dealer Algorithmic Execution LLC and a Master Feeder hedge fund structure for investors.

The Systematic Strategies high frequency equity strategy uses various trading algorithms to construct portfolios comprising long and short positions in stocks that are members of the S&P 500 universe based on models of news arrival and dissemination amongst securities in the investment universe. The models also incorporate a variety of factors well known from low-frequency research, such as market capitalization and price-book ratio, and several factors that are derived from a proprietary theoretical framework of market microstructure. Portfolios are constructed largely at the market open, when the majority of news releases take place, using a portfolio arrival price algorithm, and are fully liquidated by the end of each trading session, mainly by means of cross-matching market-on-close algorithms. Individual positions are traded during the course of each trading session using arrival price algorithms and May Be held for the entire trading session or closed within milliseconds, minutes or hours of initiation. The execution algorithms attempt to construct a dollar-neutral portfolio, balancing buy and sell orders so that approximately the same dollar value is held in both long and short positions. The news dissemination algorithms are based on proprietary models developed by Dr. Kinlay and a team of researchers to describe how news AbOUT individual stocks (earnings announcements, corporate actions, etc.) and general economic news (employment numbers, etc.) affects specific stocks and their closely related competitors in a transmission process that may last for several seconds or minutes. The algorithms attempt to anticipate the secondary and tertiary effects of news announcements about one stock on securities that are closely related, either as competitors or supply chain affiliates. The algorithms then take positions in related stocks, based on the anticipated behavior of spreads between related securities, which may continue to narrow or widen, or revert to their original level. The Systematic Strategies models allow for highly non-linear adaptive learning, so that the models may be automatically recalibrated to current market conditions dynamically throughout the trading session, updating model parameters more quickly during the periods when the market is volatile, or when correlations become unstable. The algorithms use a non-linear-transfer function to change the speed of re-calibration, and allows for regime-switching between momentum and mean-reversion strategies. The theoretical work to develop the models was carried out by the CEO of Systematic Strategies Dr. Jonathan Kinlay.

HISTORY
Research on the first Systematic Strategies began in 2005. By 2007 the first managed account began live trading with US 10 million in AUM. In 2009, Systematic Strategies was formed to build the management infrastructure required to make the initial strategy available to additional institutional investors. The firm currently has agreements in place to manage $110M in assets.

RESEARCH
Beginning in 2005, a team of research analysts with PhDs in economics, mathematics and computer science conducted a research and development program to develop and test high frequency strategies in the equities and fixed income asset classes. A number of innovative, proprietary theoretical frameworks for modeling high frequency asset processes have been developed by the team, building on prior research conducted in the previous ten years. This effort was overseen by Proteom Capital Management Ltd, an asset manager for a leading multi-billion dollar fund. Model development began in 2005 and after an extensive test/simulation process; the first strategy began live trading in 2007. The research effort is ongoing, with the objective of improving the risk-return characteristics of existing Strategies extending strategies into new asset classes and the development of new strategies. The theory of high frequency finance is advancing very rapidly and new avenues of research are currently appearing in leading journals on a regular basis. As part of its ongoing research effort, the team at Systematic Strategies reviews the latest theoretical developments across a number of relevant academic disciplines to identify promising opportunities to augment the firm’s proprietary research base.

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