Lionel Semonin, Founder and Managing Director, Four Elements Capital
Can you tell us a bit about Four Elements?
Four Elements Capital (4ECAP) was founded in Singapore in October 2008 by a team of ex-BNP/ex-JP Morgan traders and to be entirely dedicated to commodity investing. Since then the team has grown to 12 employees (including 2 consultants) and is trading more than 40 commodities globally. Our flagship fund – the Earth Element Fund (EEF) – is up an estimated 3.5% as of end of July 2011.
What is your own background?
I have been in the investment industry for over 15 years and most recently I was responsible in London for building the global commodity investor business at JP Morgan and BNP Paribas, supervising directly research, trading and business development of commodity based-systematic strategies. Bertrand Egsbaek and Marion Lefèvre, who both joined me to found 4ECAP, brought respectively their investment and fund management experience and commodities and quantitative know-how.
Describe your investment strategy and why it differs from what other fund managers are doing.
Our investment strategy is systematic fundamental. Systematic as the investment approach is fully quantitative and we therefore position ourselves in the CTA space. However, we differ from what a majority of CTAs are doing, by focusing on commodity futures only (no equity, interest rates or foreign exchange) and also because quantitative approach is applied to commodity-specific fundamental information and expertise.
What investment themes in Asia do you see as the most attractive at the moment?
We believe that one of the most interesting investment themes in Asia these days (and for a while) is the long-term – inexorable – increase in commodity prices and volatility and how developing countries (not only in Asia) will cope with it.
How has your approach to risk management changed in recent times?
After the sharp price action of May – in particular in the energy sector –, we have diversified the scope of our energy strategies in the EEF by 1) shortening the time horizon of our strategies, 2) increasing intraday trading strategies and 3) increasing the capital allocation on relative value trades.
Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
The current trend seems to still be in favour of the big global fund managers. Asian investors seem to be less interested by local talents than European or American investors are in Asian start-ups. It is a surprising outcome that investors do not see the value of smaller funds not only from a diversification but as well from a liquidity perspective. Lastly – in the commodity space – it seems smaller funds like ourselves have been able to play their cards right in terms of performance and volatility.
Why have you chosen to operate from Singapore?
We have chosen to setup our company in 2008 with US$ 2.5 million in capital. At that time we were already very aware of the importance of cost control while choosing to operate from a country/city that had a strong financial system and credibility. Singapore offered all this while providing us with a relative shorter time to market for the setup, a proximity to the Asian investor base and a certain importance as a commodity trading hub.
What would you have done if you hadn’t been a fund manager?
I have a tendency to never look back. Leaving the sell-side to be an independent fund manager in the last few years was an extraordinary entrepreneurial experience that moved the whole team outside their comfort zone: In the hedge fund business, too big to fail does not exist!