Leroy Lawrence

Quadron Capital: A firm intent on putting the science of mathematical modelling back into the business of profit making and money management

August 2023 in Buyside Interviews

Quadron Capital is a fund advisory firm that specializes in quantitative algorithmic trading strategies, providing investment solutions for a broad range of investors and managers. The company also acts as a silent partner or white label to some of the worlds leading money managers and funds who use Quadron’s strategies to create sustainable alpha for their own client base. We asked CEO, Leroy Lawrence, to tell us more about his firms use of trading algorithms and plans for the future.

Leroy, how did you become involved in the world of trading and investment management?

I began as a Stockbroker in Frankfurt. It was my second job out of university. I didn’t really know much about anything at the time, but I was a natural on the sales end and took a great interest in the markets. I also got to read through an endless list of Corporate documents for analysis and met with many board members. It gave me a very good understanding about corporate governance and what makes a company investible to the market.

When was Quadron Capital launched and how would you describe its mission and key investment objectives? 

Quadron launched in February 2014 as a Bermuda domiciled Fund Advisor. The original business plan was for it to incorporate a number of very smart quants. The goal was to build a number of automated futures and currencies algorithms for one sole hedge fund.

Who are the key members of your team at Quadron and what roles do they have within the firm? 

Our key person for trading strategy and development is Jacques, a quant formerly from PNB Paribas. We also have Will, a PhD from Canada who develops high frequency algorithms. We have a number of other staff including a PhD mathematical modeler and API integration specialists. On the business end, the board, including the CEO make strategy decisions. We are not currently so sales- orientated as we have strong partner/client relationships in place.

Our high frequency algorithms can place a thousand trades a day

What do you particularly like about the currency markets and what are you looking to exploit from them? 

Liquidity is one of the main attractions. Without it as seen in many single stock markets outside of the FTSE100 or Dow for example, trading can be very cumbersome and time limiting. The currency market can throw up lots of news lead surprises, but our quality comes in our ability to deal with these challenges in new and creative ways. We like a challenge and don’t tend to fold under pressure.

Who are Quadron’s client base and what do these investors particularly like about how your team manage and create value with money entrusted to you? 

Our clients are now our partners. We used to have traditional client / service relationship, but now we work with regulated money managers and funds who white label our products. We build, rebuild and customise our products to suite their client needs. That way our partners can have all of the expertise we have but fashion it into something specific.

What range of instruments are you mainly trading and over what sort of timeframes? 

We trade the most liquid G10 currencies. We like to hold positions for as short a time as possible. Seldom overnight and vert rarely over the weekend. Our high frequency algorithms can place a thousand trades a day. Sometimes we also trade in Futures.

Quadron offers two key managed accounts. Please explain what these strategies are, how they differ and the type of trading that is undertaken with them including some of the key indicators that are employed? 

Our two key managed accounts used to be our benchmark accounts so that we could report monthly on our performance. People like to see lineal performance before becoming involved with you, but more pressing questions of risk controls and strategy began to become more important and specific. So, we stopped trading the two benchmark accounts last year and concentrated on building custom algorithms with partners instead.

Whilst the currency market is extremely volatile and difficult to get right each month, currencies present a level of liquidity not seen in any other asset class.

Whilst the currency market is extremely volatile and difficult to get right each month, currencies present a level of liquidity not seen in any other asset class.

How much research and development has gone into building your signature Alpha Box Fund and how do you go about fine-tuning it? 

As a company we had worked with and tested around 50 quants beforehand. With the current team we used their many years of skill and experience and created the strategy and legal structure we felt best suited our potential client base.

Much of the “secret sauce” that drives your positive results is clearly based on proprietary statistical tools and quantitative analysis that allow your systems to better identify patterns in currency markets. But how does that does work in practice and lead to improved performance?

We constantly analyse the statistics and data. As you can imagine we are very secretive about our ‘sauce’.

What trading and technology platforms do you use and what are your preferred programming languages? 

We use MQL for MT4 trading as it is very popular with partners and easy to connect with. We also use C# with Multi Charts and Java API for integration.

Your literature talks about a Multi-Algorithm concept. What is that and how do you employ it? 

In-house we use the term ‘cases’ for multiple rule-based algorithms that work as one overall algorithm. It allows us to have a simple overall risk control methodology whilst maximising the amount of activity. This is very beneficial considering that market movement can become very limited during certain parts of the year or leading up to regular data announcements.

We use MQL for MT4 trading as it is very popular with partners and easy to connect with

We use MQL for MT4 trading as it is very popular with partners and easy to connect with

What forms of risk are a threat to your positive trading months and how have you gone about protecting and guarding against these? 

Our risks are typical of the market, both systematic and unsystematic. We don’t tend to see any technical problems in live trading. This is because we operate a slow update protocol. This prevents anything dramatic from happening.

How dependent is your trading on low latency infrastructure and bespoke high-end IT and what steps have you taken to manage and address this? 

Our HFT trading is extremely delicate and reliant on both very low latency and reliable multi data feeds. This is achieved by having our execution near to the exchange. A lot of our time is spent on custom API integrations for HFT partners.

Why do you think algorithmic trading is becoming increasingly popular for investment managers especially those who are heavily focused on generating returns from the currency markets? 

Most of the market is automated. Money managers want to be able to predict roughly what their month returns will be for their incoming and existing clients. Whilst the currency market is extremely volatile and difficult to get right each month, currencies present a level of liquidity not seen in any other asset class. End clients are often not fans of long lock-ins.

Many money managers are now also utilising Machine Learning and Artificial Intelligence to improve their trading performance and make allocation of capital more efficient. Has Quadron started to use these technologies as well or plans to do so in the future? 

In house we have been working on machine learning techniques. We haven’t seen any AI strategies that are reliably better than our own just yet. I think our future machine learning products will become our standard in the not so distant future.

How important are the views of your partners in guiding the development of your strategies? 

Very. We consider our white label products to be theirs. We are just the advisors and engineers attempting to achieve their wishes. This does mean there can be a clash between our experience and their wishes sometimes. However, we have good relationships with our current partners.

How have your funds been performing recently and what plans do you have for adding to your current offerings and exploiting new investment opportunities, particularly with currencies? 

Last year we struggled to create the previous levels of alpha due to major news driven events such as Brexit and Trump trade wars with China and Turkey. This has left our alpha risk taking somewhat subdued into this year. We are not terribly alarmed by this as we are about long-term gains rather than making rash strategy decisions that could damage our overall alpha. I expect our numbers become more bullish again as we move forward.