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Q & A With Stonebrook Capital Management


Company Name:

Stonebrook Capital Management


Address:

17 State Street, 38th Floor

New York, NY 10004


Contact Name:

Brad Cole


Phone Number:

312 335 9550


Fax Number:

312 335 9508


E-Mail:

Brad@colepartners.com


Product Name:

Stonebrook FX Program


Product Assets:

$25 million


Total Assets Under Management:

$130 million


Firm Inception Date:

June, 1993


Number of Employees:

5

 

Return Information

Annual Performance

1997

1998

1999

5.48*

19.21%

8.47%*

*Program track record begins in September, 1997. 1999 performance is through September.


Statistics

Annualized Performance:

16.06

Standard Deviation:

6.46%

Sharpe Ratio:

1.58

Parker FX Index Rank as of September 1999:

10 out of 53

 

Questions

1. How and when did your firm begin?

Stonebrook Capital Management, Inc. is a Delaware corporation formed in June, 1993, for the purpose of asset management in financial markets worldwide. Stonebrook registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity trading advisor on July 23, 1993, and is a member of the National Futures Association in that capacity. Stonebrook specializes in engineering systematic trading programs and structured products for our clients.

2. Who are the principals of your firm? Please provide a brief background on each.

Dr. Jerome D. Abernathy

Dr. Abernathy is President of Stonebrook and, in this capacity, has ultimate responsibility for all trading decisions. From July, 1991, through March, 1992, Dr. Abernathy was Director of Research at Moore Capital Management, Inc. (“Moore Capital”), a registered commodity trading advisor and commodity pool operator in New York. From March, 1992, through May, 1993, Dr. Abernathy was Director of Systems Trading for Investment Management Services, Inc. (“IMS”), a registered introducing broker affiliated with Moore Capital. As Director of Research at Moore Capital, Dr. Abernathy was responsible for developing and supervising the firm’s research and technology efforts. As Director of Systems Trading for IMS, Dr. Abernathy was responsible for trading IMS Global I, an offshore derivatives fund. Dr. Abernathy holds a B.S. in Electrical Engineering from Howard University in Washington, D.C. and both an S.M. and Ph.D. in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology in Cambridge, MA. Dr. Abernathy also attended the Sloan School of Management at MIT where he studied finance.

Paul Clark Meier

Paul Meier is in charge of risk management, research, and technology. From July, 1997, to August, 1998, Mr. Meier was employed by Citibank as a Vice President in risk management where he was part of a team that developed and implemented a market risk system used for calculating value-at-risk of the bank’s trading activities. From October, 1996, to July, 1997, Mr. Meier was a consultant in the risk management practice of KPMG Peat Marwick, LLP, where he performed risk management reviews and implemented risk management strategies for the firm’s clients. Prior to KPMG, Mr. Meier worked at Commodities Corporation where, from August, 1994, to October, 1996, he evaluated Commodity Trading Advisors, constructed multi-advisor portfolios, and developed risk measurement techniques for monitoring portfolios. Mr. Meier received his B.S. in Economics from the University of Minnesota and an MBA with a concentration in finance from Carnegie Mellon University.

3. Please describe your best trade ever and when it occurred.

Three periods stand out in terms of performance:

· July, 1999 – Stonebrook was short the US dollar throughout most of the month. We were short dollars versus long positions in the Euro, Swiss franc, British pound and Japanese yen. The dollar started the month on a slightly positive note before a significant reversal against the major currencies. The Stonebrook FX Program was up 3.68% in July while the currency indexes were down approximately 1%.

· January, 1998 – We were long Japanese yen, long Swiss francs, long Deutschemarks and short US dollars. The Stonebrook FX Program was up 4.73% that month, and the currency indexes were down somewhere on the order of 25bps.

· October, 1998 – Stonebrook was short the US dollar throughout the month. We were short dollars versus long positions in the German mark, Swiss franc, British pound and Japanese yen. The huge move in yen on October 7th contributed over 4.0% of the gain on the month. The long Swiss franc and Deutschemark trades made money in the beginning of the month and then gave back some profits the latter-half of the month. The Stonebrook FX Program finished the month up 4.5% in while the currency indexes were up approximately 3.0%.

4. What was your most difficult period?

The Stonebrook FX Program was down approximately 1.50% in December, 1998 (in line with the currency indexes). Most of these losses occurred in the first two weeks of the month, as we were long US dollars and short Euros, Swiss francs, British pounds and Japanese yen. We did not hold many positions in January, 1999, but reestablished a long US dollar bias in February, 1999 and made back the losses, and then some, during these months.

5. What is your outlook about the direction of the JPY, USD and Euro for the remainder of the year.

We don’t necessarily have an opinion on this. Our program is systematic, so it doesn’t particularly matter if a market goes up or down-as long as it goes somewhere.

6. What is your view on emerging market currencies?

Emerging currencies tend to be managed currencies. As a consequence, we don’t think they are good speculative vehicles.

7. What types of instruments do you trade?

We trade the major currencies.

8. Is leverage used? If yes, maximum leverage amount? What is average leverage amount?

We trade all of our programs at 1X leverage unless a client requests otherwise.

9. What is the average length of time positions are held?

Most positions are held for a couple of weeks. On average, winning trades tend to be held for 2-4 weeks, and losing trades for 1-2 weeks.

10. Average number of positions during the month.

During the average month, we will hold two to three positions.

Profit & Loss

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