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December 12, 2018  

BlackBox Offering Isolates Big Stat-Arb Plays

A statistical-arbitrage manager with a history of strong returns is setting up a vehicle that would employ the higher-capacity strategies of its flagship fund.

BlackBox Group is calling the new offering Unlimited Alpha. It would invest alongside the existing BlackBox Master Fund in pairs trades involving long and short positions in closely related stocks — say, the Class-A and -B shares of a single company.

BlackBox has yet to set a launch date for the new fund.

The New York firm, led by former Susquehanna International trader Michael Salemi, styles itself as employing a “grey box” approach that combines systematic trading with human strategy decisions. It has produced a Sharpe ratio of 4.2 since launching in 2009, with an annualized gain of 11% and a maximum monthly decline of 0.8%. Over the first 11 months of this year, it was up 9.8%.

BlackBox has less than $50 million under management.

The firm is telling potential limited partners that, had Unlimited Alpha existed since the beginning of 2015, it would have generated a Sharpe ratio of 3.2 with an annualized return of 18%. The parameters for its investments include projected Sharpe ratios greater than 3, low correlations to the S&P 500 Index and capacities sufficient for a $100 million fund.

Salemi is BlackBox’s chief investment officer. Partner Brian Jones is chief technology officer, with responsibility for developing the firm’s financial models while overseeing some investments.

Emerging Manager, a marketing firm led by Paul Eckel, assists BlackBox with capital-raising.