The firm was founded in 2005 by a highly experienced investment team who have worked together since inception, ensuring full continuity of investment philosophy and risk management processes.
Credence deploys capital within a range of very liquid strategies, seeking to harvest risk premia arising from the price level and the term structure of various financial derivatives. The firm seeks to generate attractive risk-adjusted returns which are uncorrelated with mainstream asset classes.
Credence has a singular focus on a Non-Directional strategy. The strategy uses systematic, in-house investment processes that capture opportunities arising in the global derivatives market. The predominant approach is trading the volatility of various assets.
We invest using a combination of complementary methods. Economics have yet to provide a single perfect methodology to allocate capital; each of the traditional investment approaches has important shortcomings taken alone. Each investment approach has important strengths, however. Taken together, a combination of contrasting methods offers us the opportunity to cover the weakness of each with the strengths of others, increasing our portfolio performance despite the imperfect data.
What we do is place theory first. We identify a sound macroeconomic rationale. Then we define a risk profile that produces weights of individual risk factors with a specific goal (i.e. hedge against a particular event, protect capital, or minimize volatility). And finally we distinguish factors that offer compelling premia to harvest: behavioural effects leading to herding behaviour, trending regimes that cause momentum, a potential mean-reversion to fair value, etc.
Products & Strategies
Credence offers a series of volatility-related strategies for segregated client portfolios.
The most prominent applications are systematically earning the well-established Volatility Risk Premium, or tail-risk hedging tactics to mitigate client portfolio investment risk, or a combination of both.
Our method utilizes proprietary indicators to prompt trading alerts:
– Filter overlays to detect risk-on / risk-off periods;
– Oscillators on forward curve for specifying best point of term structure to deal in;
– Signal filters to deleverage during large unfavorable moves;
– Hedging alternatives to optimize risk management and reduce cost and correlations;
– Dynamic vega sizing in multiple time intervals.
The Volatility Risk Premia strategies have a history of proven performance in equity, foreign exchange and commodities volatility. We target for convexity at times of market underperformance, positive carry during good times and high-reactivity when benchmarks fall short.
The firm is also employed as Investment Advisor to the Incometric Athos (LF) Global Navigator Fund, a Luxembourg-based UCITS for which we develop and implement the volatility overlay strategies. Volatility derivatives are a core segment of the Fund’s portfolio and Credence is the driver behind its absolute return strategy. Click here to learn more about the Fund
In the last years volatility has become a new asset class for investors looking to diversify their portfolio strategy. Trading volatility can take advantage of natural inefficiencies in financial markets and add diversification to portfolios of equity, fixed income and other mainstream investments.
The number of volatility derivatives is steadily growing since mid-2000’s. Today, two out of 10 most traded stocks in NYSE are volatility-related exchange-traded products.
Volatility Explained: Our chief portfolio manager answers some commonly asked questions about trading volatility. Click here
Today we understand we need to generate the income and returns required to meet our investors’ spending needs and liabilities. Bonds yield extremely low returns. The stock market is often able to offer some good returns but the stock market has a whole lot of risks associated with it, that are all well known. Our way to address this is to suggest clients build portfolios with many engines of return.
Our investment philosophy offers a return engine that does not rely on interest rates, dividends, coupons, or price appreciation to perform well, making it particularly attractive for investors seeking alternative sources of income.
We have not set out to be deliberately different by choice but we find that applying our investment strategy results in a number of fairly unique performance characteristics. We do not rely on carry or yield, nor consistently sell optionality to enhance results. We structure our portfolios so as to complement a traditional portfolio of equities and bonds. We stand out in trading only in liquid, transparently priced and operationally simple instruments.
We are an independent business, that does its own research and uses in-house developed systems not available to third parties. Our investing culture of capital preservation has kept us in the industry through the most challenging times.
Investing with Credence affects a traditional multi-asset class portfolio by providing better long-term results and reduced drawdowns—both in frequency and in extent. Ask your contact with Credence to provide you with our relevant studies.
Credence Capital Management Sole Proprietorship. Samara 9, Athens 15452, Greece firstname.lastname@example.org
For the purpose of offering investment advise in Greece, Credence Capital Management is engaged as Tied Agent with KM Cube Asset Management S.A.