Nelson Saiers was promoted to full partner and co-managing member of Alphabet Management LLC after leading the volatility hedge fund to a 27 percent advance since July 2010.
The company, which specializes in options to bet on the swings in stocks and other assets, will change its name to Saiers Capital LLC, according to a Dec. 6 letter to investors obtained by Bloomberg News. The promotion of Saiers, 37, will be effective in April and he will remain the chief investment officer, the statement said. Founder Jason Adler, 41, will stay in charge of the company’s non-investing activities.
“Together with Nelson’s leadership, we have significantly expanded the asset classes we trade, our geographic coverage and have tripled our assets under management,” Adler, who started the firm in October 2007 with $11 million, wrote in the letter.
The firm manages $565 million and returned 9 percent this year, according to a person familiar with the fund’s assets and performance. The average annual return since inception about five years ago is 17.3 percent, said the person who asked not to be identified because the results are private.
The HFRX RV Volatility Index, which tracks funds that bet on stock swings, is up 8.4 percent this year through the end of October. The broader HFRX Global Hedge Fund Index rose 2.6 percent in 2012 and it is down 0.9 percent since Saiers started working at Alphabet in July 2010.
Volatility is a small part of the hedge fund industry, with inflows this year accounting for 4.3 percent of the $20.4 billion added to funds during the first half of this year, HFR data show.
The name of the firm’s investment funds, Alphabet Partners LP and Alphabet Offshore Ltd., will not change, said Adler, who created Alphabet by transforming his former firm, Geronimo LLC, an options market maker that he founded in 2001, into a hedge fund.
The team of 11 investment professionals includes Saiers’s brother Scott Saiers, who was hired as head trader earlier this year. They use derivatives including exchange-traded options to bet that volatility levels for stocks and other assets worldwide are too high or low in relation to each other. The fund uses its own pricing models to monitor options markets and make trades.
Saiers was a managing director for proprietary derivatives trading at Deutsche Bank AG, Germany’s biggest lender, before joining Alphabet. He worked at the bank in New York for three years and previously held trading positions at UBS AG and Susquehanna International Group LLP. He earned his doctorate in math from the University of Virginia, in Charlottesville, at 23.
“Nelson is one of the brightest people I’ve worked with,” Peter Lambrakis, head of equity derivatives trading for the Americas at Citigroup Inc., said in a phone interview. He was employed at Deutsche Bank and Susquehanna with Saiers. “Someone with his skill set is likely to be successful trading in a market that’s very interconnected and dense with information. Not just because of his unique mathematical skills, but also because of his ability to identify relationships and connect situations that affect other parts in the market.”
Bets on rising volatility have lost this year as the benchmark index for U.S. stock options slumped 29 percent. The VIX, as the Chicago Board of Options Exchange Volatility Index is known, closed yesterday at 16.58, below its average of 20.46 over its two-decade history. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index.