Drobny European Conference, October 2014

Transcription

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Drobny Global Monitor
October 30, 2014
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www.drobny.com
[email protected]
202-210-4456
Biases:
EQUITIES: Bearish Major Country (non peripheral Eurozone) Equities
BONDS:
FX:
Bearish Yen
EMG:
Bearish Asian EMG interest rates;
Current Exposure:
EQUITIES:
BONDS:
Long Euro vs JPY (initiated Oct 16, 2014)
FX:
COMD:
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2014 London Conference Review
* Please note latest changes to biases and/or exposure
------------------------------------------------------------------------------------------------------------------------The London Conference took place amidst some wild market moves, especially with all the
excitement in Brazil. And, one panelist dove straight into the Brazil action and made the case for a
3-8yr DI steepener. There’s a solid story behind the trade and the opportunity looks particularly
enticing after the fierce flattening/inversion of the curve that occurred as liquidity dried up into the
election. Yields at the front end of the curve rose sharply and the Jan18 DI future sold off as much
as 150bps from early September, with some 90bp swings along the way. Crazy stuff.
A similar thing was happening with US fixed income, but in the other direction. Despite the release
of a strong looking US employment report at the start of October, a shake out of short positions
unfolded as oil prices fell sharply and equities started to shake. And, this occurred amidst increased
volumes and plentiful liquidity, limiting the extent of the eventual move down in yields, though with
some wicked swings on the way as well.
And, then there’s the shake in US equities. There’s a consensus to be long and during the October
violence there was a pretty powerful and decent volume sell-off in the S&P as well. Yet, despite the
turmoil, which led to some notable – and notorious – returns in the hedge fund community, here we
are again near all time highs!
But, how long will these high volumes last in the majors? This has been an odd year; periodic bouts
of illiquidity and bursts of volatility. It may be the result of a new regulatory environment which
means these events will become a new permanent feature of the environment. And, what happened
in Brazil ahead of the election could easily happen elsewhere into year end.
Copyright © 2014 Drobny Global Advisors L.P.
No reproduction, transmission, or distribution permitted without the consent of the copyright holder.
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Possible illiquidity, and the potential for ‘gamma storms’ into year end, came up repeatedly in
discussions at the afterparty. There was widespread comment about another panelist trade idea to
buy 1yr US zero strike CPI floors. It was very popular, but the appeal seems to come from a vol
anomaly: CPI swaps are priced at surprisingly low vol but have the potential to become very illiquid
instruments. You want positive gamma with these things.
Liquidity concerns also featured in discussions of switching cash positions into options into year
end, and the potential for vicious unwinds in the currency market characterized by widespread
consensus positioning and talk that banks are pulling back from providing pricing in FX options
markets. Another panelist trade, buying Euro/Yen, was in part motivated by a potential unwind in
the USD and widespread short Euro/USD exposure. Audience Polls certainly confirmed that this
group was bullish and very long the USD (Section 11, Questions 1, 2). And, the most popular
favorite trade selected by participants was long the USD, especially against the Euro (Section 12).
Long equity ideas also featured in audience favorite trades.
There were plenty of directional ideas in the other panelist trades. They included buying USD/ARS,
buying USD/JPY or SPX, buying Italian equities, and exploiting low FX/equity covariance by
buying 1yr puts on Eurostoxx conditional on a lower Euro/USD level. Two fixed income trades
were also presented. The first was to buy 5yr protection on the Itraxx Main and sell 10yr protection
against this in equal notional, exploiting an unusually steep CDS curve. The second, and for the first
time at a Drobny Conference, was the idea of gaining exposure to the onshore Chinese Commercial
Paper market by buying an ETF using total return swaps which will be listed in 3 weeks in the US.
These instruments offer 4%-plus net yield based on 6mth to 1yr CP’s.
Below is a review of the 9 presentations and subsequent discussions (bios of the speakers are at the
end of this piece). The occasional comments in brackets [………] represent my own post-conference
comments. Please remember that this is a personal view of the proceedings. Comments, critiques,
additional trade ideas, guest pieces, etc, are welcomed. The more diverse the dialogue, the better!
Thanks to everyone for making the London Conference an interesting and fun exercise. And,
especially to our friends at BNP Paribas for their continued support and partnership.
1) Luiz Parreiras of Hedging Griffo recommended a 3yr/8yr curve steepener in the Brazilian DI
curve. There has been a 100bp flattening of the Jan 18 x Jan 23 DI spread since July, with a vicious
60bp inversion move in October alone. And, Luiz argued, there are a lot of foreigners holding
longer dated bonds. If they get spooked, the longer end of the curve would get hit hard.
Luiz suggested the catalyst could be a looming fiscal crisis in Brazil. The numbers just don’t add up
and, with spending locked in place, the only solution may be a tax hike. That should certainly lead
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to curve steepening. But, this also seems unlikely as the newly re-elected Dilma is talking stimulus,
not retrenchment. When an economy suffers from stagflation, with growth slow but inflation high,
yield curves tend to steepen. Yet, the Brazilian curve is flat to inverted, with the offshore curve
slightly more inverted. That’s the effect, Luiz argued, of that overseas long. And, it sure looks
vulnerable unless, that is, short rates come down.
2) Peter Karmen of Fort Sheridan Advisors suggested buying 1yr US 0.0 CPI floors, originally
priced at 2.5c, but trading at 5-6c at the time of the conference. Vol in these puppies are
underpriced because real money tends to sell these floors as a way to boost returns. And, Peter
showed, in times of big drops in equities or commodities the floors can jump up in price. In fact,
Peter toyed around with the idea of selling way OTM equity put spreads to exploit high VIX
implieds and buying these 0 floors and earning positive carry.
There was considerable controversy surrounding this trade. A first complaint was that the strike is
too low; you’ll never get there one participant claimed. These are lottery tickets for a good reason.
One proposed solution was to shift the strike to, say, a 1% inflation floor. The cost goes up to 25bps,
which yields a 0.75% US CPI as the breakeven on the trade. Another participant suggested ignoring
the vol issue and simply get better exposure to a big decline in the CPI next year by buying OTM
swaptions on US rates. At the afterparty, the conversation turned to the recent decline in inflation.
Maybe this is the moment, one participant thought, to exploit low vol and the decline in inflation
expectations to buy CPI floors. Low implied vol and high potential for illiquidity in these
instruments should work both ways, no?
3) Mike Dooley of Cabezon Investment Group and Drobny Global ventured into the debate about
secular stagnation and suggested that buying USD/Yen or SPX fit well into his analysis. He
distinguished between good and bad deflation, suggesting that the US is enjoying a good type of
deflationary pressure.
Consider, for example, what happens if the price of investment goods halves in price. That would
raise the rate of profit, but may not pull up the growth rate very much, at least initially. This in turn
would pull down the nominal interest rate, especially if the monetary authorities respond to the
deflation threat. In such circumstances, the answer is for the monetary authorities to pursue what
appears to be an overaccomodative monetary policy to pull real rates down, stimulate demand and
eventually inflation. The FED would stay low for longer than warranted to induce an overshoot of
inflation, and might well tolerate a higher target inflation rate in such an environment.
However, betting on higher inflation isn’t so great because it can take a long time to emerge in such
circumstances. That would be a very long term bet. Instead, he thought buying USD/Yen would
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work better, due to the outperformance of US growth and US profitability. Or, you buy SPX as in
this model the rate of profit will tend to exceed the cost of money for a considerable period.
4) Eric Lonergan of M&G Episode made the case for buying Italian equities. The risk premia on
Italian equities is very high as reported earnings have fallen precipitously since 2008. A
decomposition of the earnings drop in the MSCI Italy shows revenues are still decent, but margins
are especially low. This means that we don’t need to see rapid GDP growth to have a big jump up in
profits. All that’s needed is a modest cyclical improvement which would restore pricing power and
allow for a rebound in profit margins. It’s a margin recovery that’s needed, not growth. Eric argued
that earnings were depressed recently by a front loading of AQR which placed particular pressure on
banks, so he thinks now that the AQR has passed the timing on the trade is particularly good now.
Many questions emerged, some of them about the specifics of the trade. Why Italy and not Spain?
Because it’s harder to argue that Spain did not have a bubble that is unwinding. Why not be more
selective within Italy; eg, invest in liquid companies that do business outside the Eurozone? And,
one participant who loved the trade asked during the afterparty: why not express this through options
to limit downside and anxiety? He noted that, with the index trading at 19,500, a 2yr 25,000 call,
with Dec16 expiry, costs 530points. That’s just over 2%. If the index doubles, you make 25x the
investment.
Another alternative is to execute Eric’s concept of a high risk premia directly by buying the index
and spending some or all of the dividend (3% roughly?) on selling 5yr BTP’s against it. This covers
the risk of another bout of Euro breakup fears and you don’t need to have a very large short BTP
position given the recent history of very high vol on peripheral bond yields.
5) Gerlof De Vrij of Blenheim Capital suggested buying 5y protection on the Itraxx Main and
selling 10y protection against it in equal notional. This trade exploits an unusually steep CDS
curve, can be constructed to have no credit risk for the first 5yrs of the trade, is net short protection
and thus earns decent carry and roll down. It is primarily a low vol/mean reversion type of trade,
providing exposure to a normalization of the CDS curve. The flattener component also provides
some protection against another Eurozone storm since the CDS curve tends to flatten in periods of
high stress and rising default as the scramble is typically for 5yr protection.
A neat and simple trade, exploiting a steep curve which results from 10yr CDS rates coming down
more slowly than 5yr CDS since 2012 as stress in the system diminished. One question arose about
the constituents of the 5yr and 10yr indices. Are they the same thing? Yes, except in times of high
default rates, but that is not currently happening.
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6) Ricardo Adrogue of Babson Capital suggested buying USD/ARS 1mth fwd and roll the
position. Now that’s a gamma trade! Ricardo noted that he didn’t understand the optimism foreign
investors are exhibiting for Argentinean assets. Argentina’s reserves are falling at a rapid pace and
the sharp drop in the price of soybeans adds to the problem. By the time of the election next year
(and there is no guarantee that Kirchner will not get her political allies elected) they should run out
of reserves and, typically, capital flight follows the electoral cycle. Additionally, a resolution of the
default issue looks increasingly unlikely. Moreover, Ricardo showed that the 1yr ARS forwards,
despite 50% rates, are trading cheap to the convertible ARS. Thus, he argued, the potential is for a
move of many hundred percent. Where exactly can the Central Bank stop a rout of the currency if it
emerges, he asked? Liquidity is an issue, but in any case the position has to be small. But, this one
is a potential 5-10 bagger.
[Funding the ARS short at the front end of the curve leaves the trade vulnerable to a squeeze if the
central bank protests against currency weakness and forces rates to prohibitive levels. Then it
becomes expensive, if not impossible, to roll the position. And, such a squeeze can prompt a
rebound in the currency, compounding the pressure on a short position. The solution is to just pay
the extra carry and fund longer term. Given the magnitudes Ricardo is talking about, that doesn’t
seem so problematic.]
The presentation generated considerable comment after the event. One participant mentioned a
related anomaly of the overpricing of Argentina bonds. At the same time, he noted, Vennie bonds
are underpriced. He suggests buying a 2027 PDVSA that pays a 5.375 coupon; that’s a 15.00%
yield at a cash price of 46 cents. The recovery rate is of course debatable, so there is price risk here.
But, compare this to the 2038 Argentina par bond that pays a 2.5% coupon and trades at 54.5 cents.
He apologized for an error in a follow-up email, pointing out that it is in fact paying no coupon at
all since it defaulted 4 months ago! So you buy the Vennie bond and sell the Argie bond. Another
participant implicitly noted the same point by asking later: ‘How can Argentina, already in default,
have bonds trading at a premium to some other countries in good standing?’
7) David Zhang of E Fund Mgmt Hong Kong made the case for buying China onshore CPs
through an ETF using total return swaps. This ETF, which will be listed in 3 weeks in the US and
will provide daily liquidity is a way to get Long China onshore Commercial Paper yielding about
400bps above the US equivalent AAA paper and can be purchased FX hedged or unhedged via the
CNH market. It is a way of gaining yield and getting involved in a very large and deep bond market
that previously few foreigners have been able to access. With the yield curve very flat, a 4%-plus
(after fees) yield can be obtained with half or 1yr CP’s, which limits the extent of credit risk. The
TRS allows for the use of additional leverage.
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David provided a nice overview of the developing Chinese domestic fixed income market, which is
admittedly still in the early stages of opening up to direct foreign investment. And, his presentation
garnered lots of interest. Indeed, many questions were raised, mostly about credit risk given the
recent emergence of defaults and a seemingly unaccommodating central bank? Default risk is
generally misunderstood with regards China, David replied. The main risk is banks, which are not
part of the CP Index. And, the potential for a property crash feeding into a deflationary spiral of
defaults is very low, he claimed. There is not much leverage in property in China as minimum down
payments are 30-40%. In fact, the top 10 issuers in the AAA CP Index are utility companies. That
didn’t satisfy all the credit concerns, as utility companies are price takers and apparently regulated
by local authorities, which seem in some trouble and could squeeze these companies.
Why not just play the currency itself, asked another participant. It also offers decent carry, the
potential for leverage, and you avoid the default risk? In fact, it was noted that the main volatility in
the unhedged CP Index came from currency volatility. And, right now it looks pretty expensive
given the rally in CNH since the summer, noted one participant. David acknowledged that the FX
hedge is certainly the moving part, but insisted that the perception of credit risk by foreigners is way
overblown especially in the commercial paper market since the issuers are SOEs strictly regulated by
the central government. Because of its sheer size (3rd largest in the world), it is quite obvious that
the Chinese fixed income market is one that we are going to want to keep an eye on as it develops.
8) Karim Chaoui of BNP Paribas Equity Derivatives team suggested buying a 1yr Eurostoxx 50
put struck at 10% OTM contingent on Euro/USD trading below 1.2350, which is only a few big
figures away from spot. The trade exploits low equity vol, low currency vol and a low equity/FX
cross correlation which gives the best entry point for this trade since 2007. As a result, an equivalent
plain vanilla put on the Eurostoxx 50 would cost 5.3%; this contingent put costs 1.7%. And, it’s a
long covariance trade, providing exposure to the typical rise in correlations that emerges in a crisis.
The trade idea also created quite a discussion on intra-asset correlations. It was pointed out that
some of the recent moves and dislocations in markets have been accompanied by shifts in
correlations between FX, rates and equities. So, the trade idea is a neat idea for a big crisis, but what
if the underlying correlation in Eurozone equities/Euro FX turns out to be negative? Perhaps the
positive correlation observed in 2008, 2010, and 2011 was the anomaly? All good questions!!
9) Yours truly recommended buying the Euro against the Yen. The Japanification of Europe is a
widely accepted concept, but its implications for the Euro currency itself have not been taken on
board. A deflating C/A surplus country often suffers from surprise currency strength. Eurozone
officials want the Euro to fall, but does anyone think the Japanese wanted USD/Yen to break 100, or
80? Or, to allow Euro/Yen to fall below 100? They resisted all the way, but to no effect. Until, that
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is, the Japanese trade position turned into a deficit in 2011 after the tsunami. The same seems
possible with the Euro. Europe has become what Japan once was. And, the Yen is now a deficit
currency with negative real rates. That creates the potential for the Yen TWI to fall to 25yr lows,
which is something like 30% away. Combine the two and that suggests considerable upside potential
for Euro/Yen.
The motivation for the trade, however, comes from considering what might happen if the consensus
is wrong and the USD does not rally. If the consensus is right and the USD rebound is sustained,
then Euro/Yen seems a rough 50/50 bet; a competition between two weak currencies. But, if the
consensus is wrong, say because the USD keeps losing rate support as occurred during October, and
USD strength unwinds, then it seems the Euro has much more room to appreciate than the Yen given
underlying flows. Especially since the Japanese authorities are much more able to intervene quickly
and effectively to stem any rebound in the Yen. There thus seems to be an asymmetry with Euro/Yen
depending on the performance of the USD, which is not appreciated nor built into the price of
Euro/Yen options.
This trade proved controversial and prompted considerable push back. The Yen is now
extraordinarily cheap on PPP grounds, one participant claimed. At the afterparty another proclaimed
- after several beers – that USD/Yen is going to 98. The only answer to that was….another beer!
Andres Drobny
*Past reports can be accessed at www.drobnyresearch.com
10) Drobny Award Recipients
One award and One ‘Honorable Mention’ were presented at this conference:
Best Trade from the 2014 Santa Monica Conference: Bruno Coutinho of BTG Pactual nailed it
when he recommended receiving 6mth Mexico TIIE. The trade exploited a flat money market curve
in an environment where a rate hike was virtually impossible; this made the trade approximate a zero
cost option on a surprise rate cut in Mexico over the summer. Bruno mentioned how, in the previous
year, the Mexican central bank had surprised the market and cut rates after the release of a
disappointing GDP number. The same happened in June this year and, there you go. They cut rates.
Honorable Mention: Ani Banerjee of Cheyne Capital for his sustained and excellent trade ideas
submitted for the quarterly Drobny Favorite Trade compilations. Back in December 2013, he
suggested a little short dated call spread to capture the potential for an end year run up in the S&P.
And, in early July this year, he suggested buying a call on Dec14 short sterling, catching the peak in
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UK rate hike expectations (see SG#10 in, ‘Manager Favorite Trades: 3Q 2014’, DGM, July 1,
2014). The option returned over 6 times the initial outlay. Now, that’s the essence of a favorite
trade!
11) Audience Poll Results (Questions asked during the Conference)
1) What is your current view regarding the USD?
Very bullish
Moderately bullish
Neutral
Moderately bearish
Very bearish
25
46
3
1
0
Total Votes -- 75
32%
61%
6%
1%
0%
2) What is your current positioning in the USD?
Very long
Moderately long
No position
Moderately short
Very short
8
48
14
2
0
Total Votes --72
11%
67%
19%
3%
0%
3) What is your current view regarding the Euro?
Very bullish
Moderately bullish
Neutral
Moderately bearish
Very bearish
0
7
15
38
22
Total Votes --82
0%
9%
18%
46%
27%
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4) What is your current positioning in the Euro?
Very long
Long
Neutral
Short
Very short
0
8
28
31
10
Total Votes --77
0%
10%
37%
40%
13%
5) What is your current view regarding the Japanese Yen?
Very bullish
Moderately bullish
Neutral
Moderately bearish
Very bearish
2
9
18
27
20
Total Votes –76
3%
12%
24%
35%
26%
6) What is your current positioning in the Japanese Yen?
Very long
Long
No position
Short
Very short
0
10
31
23
10
Total Votes --74
0%
13%
42%
31%
14%
7) What is the likelihood that the US CPI prints a deflationary number in the next 12
months?
Very likely
Possible
No view
Unlikely
Definitely not
5
28
9
20
21
Total Votes --83
6%
34%
11%
24%
25%
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12) Summary of Audience Favorite Trades
FX Total: 31
Largest samples:
13 Long USD (vs 2 short)
6 Short Euro (vs 2 short)
2 Short BRL (vs 1 long)
2 Short Yen (vs 1 long)
2 Long NZD (vs Eur & USD)
Most interesting/unusual: Long USD fwd rate vol; Long USD fwd 18mth digital calls
Fixed Income Total: 24
Largest samples:
6 Short US FI (5 at front end)
3 Long Front End Brazil
2 Long Italy (1 vs 10yr Germany)
2 Receive Eonia (generic and 1y1y)
Most interesting/unusual: Buy long dated FVAs in US rate vol, Itraxx Main 3/5 flatteners; short
Ghana 2026 @ 80% yield (??), USD/INR USD/IDR vol swap
Equities Total: 14
Largest samples:
2 Long Japan Equities
2 Long SPY
1 Short SPX vs DAX & NKY
1 Long Ivory Coast (after big sell due to ebola scare)
1 Long Argentina via YPF vs Short EEM
1 Long Euro dividends 2014
Most interesting/unusual: 9 outright longs
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Other Favorite Trades: 5
1 Long Vol
1 Short Euro/USD contingent on SPX Vol
1 Short Euro/USD, Short BTP, Long SX7E
1 Long US 10yr/Long SPX Calls
1 Long China A Share double down w/CNH fwd carry
Commodities Total: 2
1 Long gold
1 Long vega and receive theta in copper
Biggest Surprises in 2015
4 No FED rate hike
3 Early FED rate hike
3 EZ inflation increases
3 Euro growth upside surprise
3 China growth upside surprise
2 Weak global growth
2 Russia default
2 Euro exit by key state
1 Euro hits 1.40 and then 1.1
1 Romney runs in 2016
1 Obama impeached
1 Draghi quits
1 Ronaldo joins Man U
1 UK wins world cup
1 Dilma is on next Drobny Panel
PANEL BIOGRAPHIES: Drobny Global Conference, London 2014
Exclusively Sponsored by BNP Paribas
Dr. Ricardo Adrogué ~ Babson
Dr. Ricardo Adrogué is Head of Babson’s Emerging Markets Debt Platform and lead portfolio manager for
Local and Sovereign Debt strategies. Dr. Adrogué joined Babson from Cabezon Investment Group, LLC.
Prior to Cabezon, Dr. Adrogué built a successful track record for Wellington Management Company’s
Emerging Markets Local Debt program where the business grew from $60 million to $11 billion (11/20073/2013). His performance over 5 years earned him a top ranking of 36 Emerging Markets Local Fixed
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Income managers by eVestment in April 2013. Prior to joining Wellington, Dr. Adrogué worked at the
International Monetary Fund conducting inflation modeling for the Brazil and Costa Rica desks. Dr.
Adrogué was previously with Salomon Smith Barney / Citigroup as a Vice President of Markets and
Economic Analysis, a Senior Economist & a Strategist for Panama and Peru. Prior to his time at Salomon,
he was an Adjunct Professor of Latin American Economics at New York University. Dr. Adrogué holds a
Ph.D. and Masters in Economics from the University of California, Los Angeles and a B.A. in Economics
from the Universidad Católica Argentina.
Karim Chaoui ~ BNP Paribas
Karim Chaoui is Head of Exotic Index and Hybrids trading in Europe at BNP Paribas. His team focuses on
managing Structured Products and Hybrids on European Indices. Karim joined BNP Paribas in 2005 and is
based in London. He started his career in Tokyo where he managed Japanese stocks correlation portfolios.
He alternatively managed Stock flow, Index flow and Index Exotic books, then specialised in Equity / FX
portfolio management for Pan-Asian assets in Hong Kong. He returned to Europe to lead the Exotic Index
Trading for European assets. Karim holds a M.Sc. in applied mathematics from Ecole polytechnique
(2004).
Gerlof de Vrij, Blenheim Amsterdam
Gerlof de Vrij is CEO/CIO at Blenheim Capital Management, B.V. Before joining Blenheim, Gerlof held roles
as Managing Director Absolute Return Strategies at APG Asset Management, Head of Strategy & Research
at PGGM Investments and Head of Strategy & Research at the Philips Pension Fund. Before that, he
worked at ABN AMRO’s Economics Department and moved on via Asset Management to the dealing room
as Head of International Bond Research. Gerlof is a member of the Expert Panel of the Norwegian
Government Pension Fund Global and a member of the Investment Committee of the Heineken Pension
Fund.
Dr. Mike Dooley ~ Cabezon/Drobny
Michael Dooley is a partner at Drobny, a Partner at Cabezon Investment Group, and a Professor of
Economics at the University of California, Santa Cruz. He is also a Research Associate of the National
Bureau of Economic Research and is a Managing Editor of the International Journal of Finance and
Economics. He previously held positions at the Federal Reserve Board’s International Division, the
Research Department of the International Monetary Fund, and Deutsche Bank. His published research
covers a wide range of issues in open economy macroeconomics including work on global imbalances,
crises in emerging markets, debt restructuring, and capital flight. Professor Dooley received his PhD from
Penn State University.
Peter Karmin ~ Fort Sheridan
Mr. Karmin is the founder and Managing Member of Fort Sheridan Advisors LLC, a Chicago-based
investment boutique. Mr. Karmin is the portfolio manager for the Fort Sheridan Japan Fund, CL
Asymmetry Fund and other single investor mandates. Mr. Karmin has extensive experience trading fixed
income, equity and currency markets in both cash and derivative products in the U.S., Europe and Asia.
Prior to starting Fort Sheridan in 2009, Mr. Karmin worked for 15 years at Perot Investments, the family
office of Mr. H. Ross Perot. Mr. Karmin was responsible for developing and implementing global interest
rate and FX strategies. During his tenure, Mr. Karmin was also a partner in Parkcentral Capital
Management and a portfolio manager for Parkcentral Global, a $2.7 billion multi-strategy absolute return
hedge fund. Mr. Karmin received a Bachelor of Science in Journalism and an MBA from Northwestern
University.
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Eric Lonergan ~ M&G Episode
Co-fund manager of the Macro Episode and Episode Growth funds, and manager of the Episode defensive
fund, at M&G Investments. Prior to joining M&G, he was a managing director and head of macro research
at JP Morgan Cazenove in London. Eric has a degree in PPE from Oxford and a M.Sc. in Economics and
Philosophy from the LSE. He has written a book, Money, published this year by Routledge (2nd ed). He
also contributes frequently to the Financial Times, and most recently co-wrote an article with Mark Blyth
from Brown University in Foreign Affairs.
Luiz Parreiras – Credit Suisse Hedging-Griffo
Luiz Parreiras is chief strategist at CSHG Asset Management, a $12.5bio investment firm based in São
Paulo, Brazil. He works alongside Luis Stuhlberger in the team running the Green Fund, a $8.5bio multistrategy hedge fund that started in 1997. He oversees macro strategy for the firm, working alongside the
economists and analysts teams to devise the best ideas across multiple asset-classes from equities, fixedincome to currencies and commodities. He joined Hedging-Griffo in 2002 as an intern in the equity team,
became a partner at the firm in 2006, before it was sold to Credit Suisse in 2007. Luis has a degree in
Industrial Engineering and a Masters in Applied Math, both from University of São Paulo (USP).
David Zhang ~ EFunds Hong Kong
Qiang (David) Zhang is the CIO and Deputy CEO of E Fund Asset Management (HK), where he overseas
RQFII investments and US/European business. E Fund is the third largest asset manager in China and the
second largest RQFII manager globally. Before joined E Fund in 2014, he was a portfolio manager and
Deputy CEO of Bosera Asset Management (International), managed RQFII bond funds and oversaw
QFII/QDII fixed income investments. He joined Bosera (China) in June 2009, as the deputy head of Fixed
Income Department. Before joined Bosera, he worked at DB Advisors in NYC running the global fixed
income and currency portion of their GTAA/global macro portfolios. Before DB Advisor, Qiang was a
portfolio manager at Citi Fixed Income Alternatives in New York trading fixed income relative value
strategies. He also worked at PIMCO's Portfolio Management Department for four and half years as a VP
and financial engineer since 2002. Qiang received a Masters in Financial Engineering from UC Berkeley.
Andres Drobny ~ Drobny Global Advisors
Andres Drobny is the founder of Drobny Global Advisors, a financial markets research boutique based in
Manhattan Beach, California that advises a select group of hedge funds, proprietary traders, and global
money managers on world markets. Before starting Drobny Global Advisors, he served as Strategist &
Proprietary Trader at Credit Suisse First Boston in London and NY, and was on the Global Foreign
Exchange Management Committee. Drobny also served as Chief Economist & Head of Research for
Bankers Trust Company, London. Prior to entering the financial markets, Drobny was an academic
economist at the Universities of Cambridge & London and holds a PhD in Economics from King's College,
Cambridge.
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____________________________________________________________________________________________
Drobny Global Advisors, LP is an independent research firm. This report is provided solely for informational purposes. It
is not intended as an offer to buy or sell any instrument or security nor as advice or recommendation to participate in any
particular trade or trading or investment strategy. The content of this report is based on or derived from information
generally available to the public from sources believed to be reliable. No representation or warranty, express or implied,
is made as to the accuracy or completeness of such information. Past performance is not an indication or guarantee of
future performance and no representation is made regarding future performance. Opinions expressed in this report may
be changed without notice and may be inconsistent with, and reach different conclusions from, prior or subsequent
reports. This report may not be reproduced or redistributed to any other person, in whole or in part, without prior written
consent from Drobny Global Advisors, LP.
This report does not consider the specific investment objectives, financial situation, or particular needs of any specific
person, fund or institution. Accordingly, recipients bear responsibility for their own investment research and decisions and
should seek the advice of qualified advisors, and perform their own due diligence, before making any investment. From
time to time, Drobny employees may trade for their own accounts in markets covered by the Drobny Global Monitor.
Additionally, guest research pieces written by outside parties may describe trades, trading strategies or investment
products in which the authors or their firms have or intend to acquire positions.

Drobny European Conference, October 2014

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