Orix Investment Corporation

Atsuhiro Mori, Chief Trader, Orix Investment Corporation


Can you tell us a bit about the trading group at Orix Investment Corporation?

We are four members in the trading/portfolio management group. We design and develop our own trading systems for mid- to long-term trend-following and diversified. We had been trading in managed accounts by ourselves mainly for US CPOs and prop funds since 1995 and now we mainly do trading advised by daily signals generated from our proprietary trading systems for GCI Investment Management in Singapore, who is the investment manager of the Orix Commodities Fund since June 2010. I am chief trader and portfolio manager with 15 years’ experience as a CTA. There are two senior traders including me who mainly design and develop trading systems and do research. Additionally we have an associate trader doing research and an associate for trading systems operation and administration.


You joined Orix early in your career and trained with Commodities Corporation in the US in the early 1990s – what has that experience meant for you?

I leaned a lot about trading from Commodities Corporation (CC) in the 1990s. CC was a pioneer in CTA and futures trading and it has much know-how about developing successful trading. CC’s philosophy is to allocate to a trader in the early stage of his career. CC had the Trader Evaluation Program; a training program for associate traders. It included mathematical evaluation (ROR, drawdown allocation, etc) but also evaluated traders’ originality, philosophy and consistency. When I was an associate trader, I could develop my original trading systems. There were plenty of infrastructure and resources (library, data and technology) available and good incentive fees for senior traders. In 1994 there were over 20 associate traders when I was at CC. We exchanged trading ideas and helped each other’s development at CC. There were also a few trader mentors. We could ask them about anything we wanted. Independent traders and other famous persons sometimes visited CC and held lectures for associates. CC tried to create the best environment so that associate traders like me could concentrate on their own trading and development. I liked CC in the 1990s very much and I still have many relationships with old CC people.


Describe your investment strategy and why it differs from what other fund managers are doing.

We are a CTA/managed futures manager. Our trading style is medium-term trend-following, systematic and diversified. Our portfolio has lots of Asia/Japan instruments (currently 25% on average). We have 15 years’ experience and good and long-established relationships with local brokers in Asia/Japan. We may limit allocation if we judge that our best diversification with Asia/Japan or other small markets will be difficult. Our target is the early stage in a trend. We diversify with several trading models. They are designed to be uncorrelated to each other in difficult periods for typical trend-followers. However they are correlated and all profitable during many strongly trending periods. The drawdown from the peak of a trend is expected be smaller than many other long-term trend-following methods.


What investment themes in the commodities space do you see as the most attractive at the moment?

The commodity markets are becoming more popular markets for many investors. Some commodities sometimes is “financialised” and move not by its own fundamentals or supply/demand concerns. In this meaning, some of them may become more volatile. But we are consistent; following the trend if it is up or down. Our investment theme is better diversification and to follow the trends.


How has your approach to risk management changed in recent times?

Our main risk management approach hasn’t been changed in recent times. Our risk management strategy built in the systems has been designed by very long-term and robust simulation. We often check or review our approach but it needs robust results in long-term simulation. We always look for new markets especially in Asia for better diversification.


Do you see changes in regulation as a threat or an opportunity?

The recent Dodd-Frank Act may impact some hedge funds or big trading firms. But in my opinion, CTA is the longest successful strategy in alternative investments. Many CTA strategies are very simple; following trends. And they trade exchange traded futures. It is already very transparent and has enough liquidity. They won’t be influenced much by new regulation. But it will impact big trading firms if they have to open big positions in smaller futures market. Or it will be difficult for them to trade some markets if the position limits become tighter. In Asian markets, some countries are very positive to open new exchanges and new instruments. Many of them try to introduce American style and investor-friendly methods into their trading rules or systems. Some emerging countries will also be expected to be fully open and operating to global standards. I hope all Japanese stock/commodity exchanges must follow this trend and cooperate together. Hopefully they will be more friendly to investors and be more positive to make Japanese exchanges more appealing to the world.


What would you have done if you hadn’t been a fund manager?

I would be a buy-side institutional investor. It was (and still is) the most probable job for me. Otherwise I was interested in managing a sports team. I would be general manager of a professional soccer or baseball team (Orix has professional baseball team in Japan). Or I want to help many young soccer players to go to European teams too. Like CC, I am good at spotting a good player early in his career and I may be good at selling without serious drawdowns. But maybe
this cannot be done systematically as players are human.

(Aug 2011)