Kevin Lo
Ph.D., Money Manager



Over 30 years experience in equity trading and 25 years in options trading.

Worked as an engineer, researcher and consultant in the oil industry for over 25 years.

Worked in planning for Gemstar Corp

Taught Engineering and Applied Mathematics in Brown University


B.S. and M.S. degrees in Engineering from the California Institute of Technology

Ph. D. degree in Applied Mathematics (Harvard U)

M.S. degree in MIS (U of Texas at Dallas)

FINRA Series 65 Registration - Uniform Investment Advisor Law Examination

 Investment Strategy:

  • Key West Asset Management’s Investment Advisory employs a strategy of put option writing and a set of proprietary techniques for stocks/ETF’s to maximize gain while controlling risk.
  • The primary strategy is to collect the time value of those options. The majority of options expire worthless. In cases in which the options are exercised, the stocks may be held for longer-term appreciation.  Covered calls will also be written to reduce risk to the portfolio.
  • Assets are allocated in different sectors for diversification.
  • A general portfolio approach is used with periodic balancing to ensure proper asset allocation. Typical short put holding periods range from about one to three months, while those for long stock positions range from a few days to about a year.
  • Judgment is made based on macro-economic, fundamental, and technical analysis.
  • Generally leverage is not used in the overall portfolio so that there is no net borrowing.
  • Put Option margin requirements and expected cash reserve are monitored continuously.
  • Fund’s objective is to generate high return with minimize risk (β<1).
  • The flexibility in this strategy allows easy adjustment to a customizable risk-return profile.

 Market Comentary:

  • With economic recovery taking shape in the US, investor sentiment toward equity asset class continues to improve.  We are bullish particularly in the Technology, and Consumer Goods sectors, and we also like the Basic Materials sector and Small and Mid-Cap equities.
  • Technology sector’s drivers will be based on ongoing shift from PCs to mobile phones and tablets.  Emerging tech (Android, cloud computing, internet enabling, etc.) and M&A activities will drive sector.
  • Consumer Goods look promising, especially in view of strong holiday sales figures.  Consumption is the largest component of GDP and Consumer Goods sector will proportionally benefit from economic recovery. Low P/E ratios in select industries provide good upside potential in profits.
  • Basic Materials sector, especially Gas and Oil industry, is attractive as fossil fuel remains the choice energy source for the foreseeable future. We particularly like the independent oil and gas producers and niche services/equipment providers.
  • Small and Mid-Cap stocks have returned to its long-term trends of outperforming the general market and we expect the trend to sustain as the economy recovers.  Our play will be in sector ETFs to diversify away volatilities associated with individual stocks.

Performance VS. Benchmark Indices (1/1/2008 - 8/31/2012)

*Source: HFR, Inc. Historical performance of HFRI Fund Weighted Composite Index

** Source: Standard & Poor’s Financial Services LLC. Historical record of S&P 500 total return index level

 Historical Performance Record and Risk Record (1/1/2008 - 8/31/2012)

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Anuual Return

Dr. Lo

HFRI

S&P500

2012

8.40%

7.12%

5.09%

-2.17%

-2.33%

1.90%

0.22%

4.05%

-

-

-

-

23.91%

3.52%

13.50%

2011

-5.61%

5.32%

-7.45%

3.34%

0.05%

-7.51%

2.66%

12.36%

-5.56%

8.28%

-1.76%

5.90%

7.97%

-5.25%

2.05%

2010

-2.16%

2.85%

2.91%

-3.03%

-2.66%

-6.68%

5.09%

-4.58%

4.63%

5.83%

-2.37%

1.35%

0.22%

10.25%

15.06%

2009

1.21%

-6.74%

6.29%

2.84%

4.76%

0.04%

4.70%

0.29%

2.09%

0.54%

3.50%

0.01%

20.61%

19.98%

26.46%

2008

9.41%

3.01%

-14.43%

-1.53%

0.44%

-23.02%

18.78%

20.86%

-5.63%

14.76%

-1.25%

-0.55%

12.12%

-19.03%

-37.00%


 

Since 1/1/2008

Alpha (%/yr)

14.52%

Beta

0.33

"'Jensen's Alpha"
The basic idea is that to analyze the performance of an investment manager you must look not only the overall return of a portfolio, but also at the risk of that portfolio. For example, if there are two Investment Funds that both have a 12% return, a rational investor will want the fund that is less risky. Jensen's Alpha is one of the ways to help determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's Alpha means a fund manager has "beaten the market" with his or her stock picking skills.

"Beta Explained"
Beta is calculated using regression analysis, and you can think of beta as the tendency of a fund's returns to respond to swings in the market. A beta of 1 indicates that the fund's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk."

Read more: http://www.investopedia.com/terms/b/beta.asp#ixzz28kQI8eTR