Scenario 2
Three years later, your manager asks you to do another assessment of RDJ Investments. RDJ managed to raise £5 million in their initial seed funding. Following this, their performance was below average for the first 18 months. After a re-evaluation of their processes, they decided to hire someone to advise on trade strategy. The finance professional they ended up hiring had worked primarily in bonds at a major UK bank for 10 years, and for the past five years had been involved with systematic trading at Goldman Sachs at the executive level. He also has good connections with local regulators and is currently assisting RDJ with getting regulated. With help from the finance professional, the founders of RDJ have also recalibrated their model and have been carefully testing its sensitivity to slippage assumptions.
They have since changed their focus to middle-term trend models focused on commodities and bonds. Subsequently, their performance has improved. They are attempting to raise funding again.
Figure 1 illustrates RDJ’s quarterly performance compared to that of Man AHL’s Trend Alternative DNY USD fund, from the second quarter of 2015 to the second quarter of 2018.
Figure 1: Quarterly return comparison.
From the scenario, it is clear that RDJ Investments have made material changes. In light of this, consider the answers you provided in Part 1 of this activity, and then build on them by answering the questions below.
(Max. 300 words)
