Dynex Corp. is owned and run by its founder, Peter
Panholzer. He has been a trading advisor since 1973 in a number
of countries and continents, having previously been an architect.
His first trading experience came trading silver in 1973 while
living in Toronto. He is Austrian by birth hailing from Vienna.
In 1979, Panholzer started the Magnum program with
ContiCommodity - a subsidiary of Continental Grain - which, he
believes, may have been the first pure currencies-only program
traded with more than 200 clients. In order to be able to market
the Magnum program worldwide, ContiCommodity suggested that he
return to Europe, so Panholzer decided to join the firm's office
in Lugano, Switzerland.
Panholzer traded there from 1981 to 1984. That final
year was a difficult one for his trading and despite achieving
triple-digit returns in the previous three years - the Magnum program eventually
experienced a serious setback. This, combined with the sale of
ContiCommodity to Refco, dispersed most Magnum clients who had
joined from ContiCommodity's worldwide offices.
Refco decided to close its Lugano and Geneva offices,
and Panholzer decided to move to London and join E.F. Hutton,
where he worked with Robert Scheiner at the firm's Curzon Street
office. Here, Panholzer got his first experience trading spot
foreign exchange but finally felt that better earning potential
lay in a move back to Refco. Panholzer joined Refco under managing
director Richard Reinert.
Panholzer set up Panholzer Advisory Corp. in 1988 and Dynex
Corporation in 1990 and moved to Monte Carlo from London in 1992,
having fallen for that city's charms while on vacation. Dynex
is the investment advisor company to Panholzer's accounts and
to his new fund, the Pan-Forex fund, which started trading June
1 (see Update on page 3). Panholzer Advisory Corp. is the entity
for US investors, though none exist at this time.
Initially, Panholzer's clients came through banks
and other funds - particularly Japanese funds. Panholzer is a
contrarian trader, trading over a short time horizon of one or
two days. "I am proud not to be a conventional trend follower," he
says. He believes that while markets trend at their outset, in
time they become more and more random. In 1988, he wrote that
the tendency of currencies to trend was deteriorating along an
irreversible, declining path. At that time, he estimated that
an annual reduction of 4% in market exposure would be the proper
remedy to this telltale warning signal.
In retrospect, he feels that this counter-measure was too tame.
"Randomness (as opposed to trending) in currency markets
increased dramatically rather than gradually through 1993 and
1994, causing very bad performance among conventional currency trend followers
during those two years," he says.
Contrarian trading strategies try to detect when
buying or selling power has exhausted itself. "They prove
to be most effective when public opinion about market direction
has become overwhelmingly one-sided," Panholzer says.
In terms of markets that he trades, Panholzer uses
all the major currencies against the dollar. However, his major
profits have been in US dollar/Deutsche mark and US dollar/Japanese
yen. He believes that this is because they are the most liquid
markets and that as a result, execution is better.
His figures show a one-year average annual compound
return of 20.2% with a maximum decline of 12.4%. Panholzer's Sharpe
ratio stands at an excellent 1.0.
Execution enhances performance
Execution, Panholzer claims, can be responsible for
a quarter and even up to half of the performance he achieves.
The bid/ask spread on foreign exchange trades offered by the
banks varies from 3 to 5 pips depending on whom he uses.
However, Panholzer has completely given up trading
futures and won't look at the currency futures markets because
he finds these markets not accessible over 24 hours and the commission
structure too onerous. "Trading currency futures through
the International Monetary Market, with its fees and brokerage
commission, makes them too costly for frequent trading,"
says Panholzer. "If the IMM duplicated the FX market, offering
three pip-wide bid and ask spreads without exchange fees and tacked-on
commission, I would trade it with a standardized contract date
and size," he says. He feels that while the foreign exchange
market has evolved, the IMM has not achieved that process yet.
Panholzer's risk-control measures include stopping
trading if he loses more thant 5%. "If
you lose more than 5%, then cut out and leave the month alone,
" he says. He employs leverage at an average ratio of two
and a half, although he can go up to five times by agreement
with the client.
Currently, clients include four banks, one fund and
several investment corporations. They each require a different
trading desk and one of Panholzer's aims for the near future is
to have all his new customers use the Pan-Forex fund. "If
you look at Monroe Trout, you will find that he had just one fund
from the beginning - I believe this to be ideal," he says.
If he wishes to trade at the moment, he has to call five different
banks. "I need a telephone operator," he jokes. "I
have had to turn business away because I cannot have more trading
desks." He currently uses UBS, Citibank, Refco F/X, Credit
Agricole and a Scandinavian bank.
Panholzer claims to run a truly paperless office
and has a marketing office in Paris as well as a permanent backup
computer in London. The computers are all linked by the Intranet,
a new invention that allows computers to link up using Internet
technology but offering total security.
Panholzer believes that he can offer medium-sized
investment banks the opportunity to "farm out" some
of the proprietary trading in which they have to engage. As a
contrarian trader, he believes that methodology offers excellent
diversification to more traditional trading systems. "I believe
that our approach is unique," he says, "And correlates
little with other trading approaches.". [[an error occurred while processing this directive]]