Gamma Capital Management, LLC

Gamma Global FX

Program Description: The objective of the Gamma Global FX Program is to earn a substantially higher return than other assets of comparable risk while generating returns with zero or negative correlation with major global equity and fixed income benchmarks. An investor trying to earn such an excess return (risk-adjusted return) must use better information or be able to analyze existing information more accurately than other investors. A strategy that relies on better analysis must be consistent with the economics of how markets value assets and must not be used by too many investors. A widely used approach will arbitrage away the market conditions responsible for its initial success. The Gamma strategy assumes exchange rates are determined by fundamental economic factors that affect supply and demand and that investors are rational in the long term. In the short run, however, exchange rates can deviate from levels consistent with full, correct discounting of all available information. This occurs because information is not a free good. Investors must spend time and resources to acquire and properly interpret new data. New information is incorporated gradually rather than instantaneously into the market price. This causes the actual exchange rate to deviate substantially from its true equilibrium or "fair value" level in which all available information is correctly and fully discounted. The goal of the Gamma forecasting approach is to more accurately identify long term trends in fair value and those times when exchange rates deviate substantially from their true fair value levels.