Stairs
AN ALTERNATIVE INVESTMENT STRATEGY
Did you know?
Consistent compounding multiplies your capital
manifold
At 20% CAGR, your capital grows five (5) times+ in 9
years (INR 100 grows to INR 516). In the last 9 years our
program, STAIRS, has compounded*** at much higher
rates.
A single year of negative returns sets your portfolio
back significantly
Let us assume that the market averages a 20% return in
a good year and loses 20% in bad years. One bad year
after every two good years results in INR 100 growing to
INR 153 at the end of 9 years.
Compare this to steady annual returns of 15%. INR 100
grows to INR 350 over the same period. STAIRS has not
had a negative year since 2000***
With high levels of inflation, most real returns are
actually negative
If inflation averages 8%, real returns on most instruments
are at best marginally positive. In each of the last five
years, STAIRS has returned upwards of 40%***
*Net performance return after all transaction costs but before performance fees.
**SPOT refers to the underlying indices in the same proportion as the STAIRS
constituents: viz 75% Nifty Futures (NF), 25% Bank Nifty Futures (BNF).
***All returns prior to Jan 2010 are the result of a simulated backtest.
Are you grappling with the following
issues?

Levels to enter / re-enter the market

What to buy


Equity markets plagued by corporate governance issues
Significant value destruction in many sectors eg. Real estate, infrastructure, capital
goods

Time to oversee your portfolio actively

No plan if trade goes wrong / adhering to a plan

Erratic portfolio performance particularly since Jan. 2008
The STAIRS strategy intends to…

Provide absolute, real returns annually
The strategy relies on price behaviour (trend following ; a subset of technical
analysis) and not on fundamental research and analysis
 The strategy does not attempt to predict the market


Diversify your existing equity/debt portfolio
The returns from this strategy are totally un-correlated to the market/underlying
 It diversifies your asset base from being “long only” as STAIRS is a long/short
strategy


Provide protection to your overall portfolio in periods of stress
Managed Futures

Managed Futures are a rapidly growing, globally recognized alternative investment class.

These programs are typically based on mechanical sets of entry and exit rules for trading any
number of asset classes eg. equities/ commodities etc. The extent of risk and exposure per
trade is controlled through “position sizing”. The client trades in their own brokerage account
based on the advisors’ strategy.

Managed Futures asset allocation/diversification is now recommended as an integral part of any
diversified, global portfolio. Typically, 10% - 20% allocation to this asset class is recommended
as per best global practices.*
* See Appendix
Growth of Global Managed Futures Assets as of CYQ32008
Global Managed Futures Assets as of CYQ32008
Tenets of successful trading systems



The number of winning trades versus the number of
losing trades. Contrary to common perception, a large
number of successful global traders average only around
45-60% winning trades. The STAIRS strategy has been
averaging around 60%***
The average amount gained per winning trade vs given
back per losing trade. A successful strategy must
generate a significantly larger average gain per winning
trade than the amount given back on a losing trade.
Typically, this ratio is considered good above 1.5-2X. The
STAIRS strategy has been averaging around 2.5X***
Risk management techniques such as position sizing are
explained in the Appendix
Historical Performance Statistics
Symbol
#Wins
#Losses
Ratio
NF
229
169
1.36
BNF
130
79
1.65
Symbol
Avg.
Win
(pts)
Avg
Loss
(pts)
Ratio
NF
122
54
2.25
BNF
364
129
2.82
Symbol
Largest Win
(pts)
Largest Loss
(pts)
NF
1011
231
BNF
2455
354
Data for the period
NF : 01.01.2001 to 08.10.2010
BNF: 13.06.2005 to 07.10.2010
***All returns prior to Jan 2010 are the result of a simulated
backtest.
STAIRS

STAIRS, our proprietary strategy, is a discretionary trading
system which aims to generate absolute returns regardless
of the market direction

The STAIRS strategy generates trades based on strict trend
following rules. The strategy has been back tested on more
than 10 years of historical market data.

The STAIRS strategy has been traded with capital since Jan
2010 and the strategy trades the Nifty futures on the NSE.

The STAIRS strategy intends to preserve capital by position
sizing such that any one trade does not result in a loss
bigger than 2% of the capital

The strategy generates both long and short trades and
capital is invested at all times. However, the STAIRS
strategy is not a day trading system. The strategy generates
on average 10 to 15 trades a month.

STAIRS is not a black-box / algorithm driven system
*Net performance return after all transaction costs but before performance fees.
**SPOT refers to the underlying indices in the same proportion as the STAIRS
constituents: viz 75% Nifty Futures (NF), 25% Bank Nifty Futures (BNF).
***All returns prior to Jan 2010 are the result of a simulated backtest.
STAIRS – Strategy Features

Clients trade in their own NSE brokerage accounts.

Clients are free to stop/ exit the strategy at their own discretion

All gains accrue in clients own brokerage account

Live strategy performance is auto-updated at www.rohiniglobal.com.

Advisor fees based solely on performance; payable quarterly

Strategy advised by investment professionals with more than 30 years of combined
market and trading experience.
STAIRS - Risks

Risk is integral to trading in futures markets. There is always the risk of loss of capital. Superior
returns are a function of this risk.

Risk however, is controllable and manageable in most situations. For instance, the maximum intraquarter draw down on capital experienced from any profit point in our strategy till date is about 40%.

Positional risk in systematic trading is much lower than in conventional, directional trading due to
position sizing.

Overnight Global event risk is the most significant risk to this strategy in line with any other positional
strategy.

Risk of leverage. This is controlled to a large extent by using conservative leveraging of
approximately 2X of the capital.

Risk of the “unknown”.
Clients are advised to read all risk disclosure documents carefully. Derivatives are inherently risky and there is potential risk of loss of capital.
% CHANGE
STAIRS – Performance during stress periods
The Global experience
***All returns prior to Jan 2010 are the result of a simulated back test.
STAIRS – Quarterly Performance
***All returns prior to Jan 2010 are the result of a simulated back test.
Year
% Rtn
Year
% Rtn
Q1 2007
17.60
Q1 2011
8.26
Q2 2007
11.58
Q2 2011
25.93
Q3 2007
1.14
Q3 2011
23.73
Q4 2007
29.90
Q4 2011
-4.59
Q1 2008
14.85
Q1 2012
0.76%
Q2 2008
1.91
Q2 2012
-7.48%
Q3 2008
39.97
Q4 2008
54.77
Q1 2009
13.93
Q2 2008
18.29
Q3 2009
59.45
Q4 2009
37.42
Q1 2010
14.01
Q2 2010
19.53
Q3 2010
12.94
Q4 2010
14.70
*Past performance is no guarantee of future performance.
STAIRS – Annual Performance
***All returns prior to Jan 2010 are the result of a simulated back test.
Year
% Rtn
Year
% Rtn
FY2007
60.22
FY2011
52.41
FY2008
111.50
FY2009
129.09
FY2010
61.18
*Past performance is no guarantee of future performance.
Advisory Fee Schedule

Performance based advisory fee at 30% of all gains, billed quarterly. Service Taxes are
as applicable.

A “high watermark” as per international practices is used. (In negative return quarters, no
fees will be billed. Fees will only be charged once all previous losses have been
recovered).
Sample Fee Chart (advisory fee paid quarterly)
QTR
Quarterly
Performance
Advisory Fee
@30%*
Q1 09
+9%
+2.7%
Q2 09
-12%
NIL
Q3 09
+6%
NIL
Q4 09
+12%
+1.35%
Q1 10
+8%
+2.4%
RohiniGlobal

RohiniGlobal group of companies was founded in 1996. The
group is committed to creating a program based, mechanical
trading platform with the ultimate objective of providing
diversification across major global markets and asset classes.

Professional advisory services are rendered by Rohini Online
Services LLP, New Delhi, India.

Mr. Alok Jain is the founder of RohiniGlobal group of
companies
He has diverse trading experience in the Indian and the US
equity markets with a majority of his research focused on
technical system development and mechanical system
modeling. He graduated from IIT Delhi (1991) and obtained
the degrees of Master of Finance and an M.B.A. from the
University of Maryland(1995). His successful trading career
spans well over 15 years.
APPENDIX
Risk profile- single day returns
The above picture shows the cumulative and one day returns of the STAIRS strategy over a 18 month period. The
blue dots are the cumulative performance and the black line is the one day return. The figure indicates the nature
of the equity curve as it gains ground after each drawdown in a “STAIRS” like formation. This picture also
shows the overall performance of the strategy during and after a period of excessive volatility.
Clients are advised to read all risk disclosure documents carefully. Derivatives are inherently risky and there is potential risk of loss of capital.
Leverage and position sizing

The National Stock Exchange determines the minimum margin permissible for each
leveraged position/product. Under normal circumstances, the leverage permitted by the
exchange, on an index futures product such as the Nifty is 6-9 times.

High leverage can be advantageous or extremely risky. A move in price of 15% against your
position with 6 times leverage would wipe out your entire capital. To manage risk
appropriately, we recommend using approximately 2-2.5 times leverage in the STAIRS
strategy.

Position Sizing is a money management technique used to determine what size of position
to take basis your absolute investment, as also the risk to be assumed per trade. We
recommend that on capital of INR 25 lacs, a position size of INR 50 lacs should not be
exceeded. It is our endeavor to never generate more than a 5% loss of capital on a single
trade.

Money Management ensures that even after a string of losses, you have enough capital
available to build back your investment with.
Portfolio diversification – global context
The Chicago Board of Trade's booklet, Managed Futures, Portfolio Diversification Opportunities, shows a portfolio with the greatest risk
and least returns comprised of 50% stocks, 50% bonds, and 0% managed futures while a portfolio exhibiting the greatest returns and
least risk, comprised 37.5% stocks, 37.5% bonds, and 25% managed futures.
*Results obtained by adding managed futures component at an incremental rate of 1% while simultaneously reducing the stock and bond
portions by 1% each. Based on monthly data from 1980-2004 on an annualized basis.
1 Stocks: S&P 500 Index (dividends reinvested)
2 Bonds: ML Domestic Master Bond index (over 1 year with coupons reinvested)
3 Managed Futures : MAR CTA Index
** Past performance is not necessarily indicative of future results.