About Emil Van Essen

Summary: The program trades only spreads across the energy, physical metal, agricultural and grain futures complexes. The goal is to capture opportunities created in the spread markets by rolling in the long-only commodity funds. Average trade length is 30-60 days. The program uses an average of 8-12% with a range of 5-20% margin to equity and is 80% percent systematic and 20% discretionary. AUM are $9.4MM. Stop orders are not used in the spread markets, however, when a trade exceeds the dollar risk level it is exited in an orderly manner to avoid excess slippage. There is no lock-up period so redemptions can be made daily. Fee structure is 1X20% and utilizes high water marks. The program executes approximately 8000 round turns per million. Emil Van Essen is the head trader but in the event that he is incapacitated, Dennis Callaghan is the back-up trader and can run the program. If the program was no longer viable they would discontinue trading. Maximum allowable drawdown has been 11.8%.
One thing to take note of when watching this program trade is that large deviations in LV can occur when one leg of a spread is rolled at a time. This is not indicative of account performance but the client should be aware that this will happen. Also of note are the deep draw-downs that took place in 2007. Since their occurrence changes have been made to the program to curb the possibility of their happening again, namely that the program has been deleveraged in order to reduce lows and highs by 50%. For example in the period from September 2007 to December 2007 margin to equity range was 15-36% whereas June 2009 to present is has been between 7% and 17%. The program now allows for a range of 5-10%, with an average of 8-12%.
Description from Due Diligence Questionnaire:

Both the Spread Trading High and Low minimum programs enter spreads between different contract months in the same market. Typically, The spread trade is entered several months prior to expiration and usually exits at least one month before expiration of the nearby contract. By exiting the trade before the last month of trading, the spread avoids the potentially dangerous moves that spreads often make just before expiration. The markets traded may include Copper, Cotton, Crude Oil, Heating Oil, Natural Gas, Corn, Wheat, Soybeans, Silver, Live Cattle, Lean Hogs, Cocoa, Copper, Sugar and Coffee.
The Spread/Index Program was established by combining a modified version of our Flagship spread trading program with a portfolio of our most profitable short term Index trading systems. The Spread Program component is derived from our established CTA program with profitable results in both 2007 and 2008 and over $47 million AUM. The index programs are a portfolio of short term proprietary index trading systems that have been traded extensively and comprise a diverse group of styles and different indexes. Each index system in the portfolio has been traded with real money for between one and seven years. The allocation to each system within the portfolio is dependent on that system’s results, the correlation to the other systems in the portfolio and the length of the track record trading actual money. The two components were combined because they showed low to negative correlation to each other and tended to offset the drawdowns of the other component. The Spread Index Program is designed to have lower risk and significantly lower drawdowns than the Spread Trading Program alone.