Interview with Waqas Khan and Sheetal Patel of Narratus Capital

I recently did a long interview with Waqas and Sheeetal of Narratus Capital which we've transcribed and put into a post below. Further down yoy have the option of download a PDF version of the interview Waqas and I also did a shorter interview which you can watch in YouTube below. Hope you enjoy it.

Before getting into the interview, here’s a brief background to Narratus Captial and their extremely impressive returns they’ve seen over the last 7 years.

Both Waqas and Sheetal have an interesting background in that they come from a retail forex trading background and have been able to make the shift to professional money management.

As swing traders, Narratus holds positions for a few days to several weeks and have a trading strategy that Waqas has worked on over several years. Their advice to non-professional forex traders who want to turn professional is invaluable.

Introduction to Narratus Capital

Narratus Capital offers FCA regulated managed accounts to family offices and private clients looking to maximise total return, independently from the performance of the markets. Using a proprietary and systematic approach, the manager takes long and short positions in liquid asset classes, predominantly currencies (focusing on the main G10 and cross pairs). 

Narratus Capital’s investment philosophy is founded on creating total returns while minimising downside volatility and preserving capital. The strategy is based on a combination of fundamental and technical analysis of trend and momentum.

The strategy adapts quickly to market conditions and volatility, which the firm’s opinion makes it more robust and sustainable long-term.

Along with having achieved above-average returns of between 18.4% – 32.8% per annum over a 7+ year period, a key factor in the continued success of the strategy is the ability to have controlled downside volatility significantly with a maximum drawdown of 5%

Waqas Khan (Chief Investment Officer) started his career as an investment entrepreneur over 15 years ago. He started with a focus on property investment and development before moving into financial trading after the market crash (2008/09).

For the past 10 years, he has been focused on developing proprietary trading strategies that have become the foundation of the fund.

His investment philosophy is founded on creating total returns, whilst minimising their downside volatility and preserving capital.

He believes that it is possible to create the type of progressive returns for clients over a 3-5 year horizon that add true value to clients investments and target investment objectives that most clients would deem unachievable without taking high risks.  

This belief is an integral driver to the fund’s future value proposition. Waqas’s primary responsibilities in the fund include idea generation, research and development of trading strategies, portfolio execution across all markets and instruments, compliance and investment committee oversight.

Waqas has a BSc in Business Studies and an MSc in Financial Management from Lancaster University. 

Sheetal Patel (Chief Operating Officer) has been a keen investment entrepreneur for over a decade and is well versed in investor management and raising capital.

She has a background in the pharmaceutical industry, having over 15 years of experience in a number of senior management roles in compliance, auditing and operations having worked at GSK, Genesis, Goldshield, Amdipharm Mercury and Concordia International.

She has organically grown public and private equity-backed companies via mergers, acquisitions and divestments. She believes her pragmatic approach in meeting compliance and commercial needs has been a cornerstone of her success in growing and transforming teams and businesses.

Her ability to draw upon her patient-centric background has taught her how to build truly meaningful relationships with everyone she meets.

Sheetal’s primary responsibilities in the fund include compliance oversight, business development, investor relations and management of third-party service providers and brokers. Sheetal has an MSc in Medical Chemistry from University College London and an MBA from Westminster Business School.

Tim: So hello to you both, thank you very much for giving me some of your time. It’s good to talk. I wanted to start this meeting, this conversation with you both just giving a bit of background about yourselves. I know you both come from a non-sort of traditional background; you come from the outside of the industry. So maybe if you could just explain a little bit more about yourselves, please.

Sheetal: Hi Tim, thank you for having us both. So I’m Sheetal; I’m one of the co-founders of Narratus Capital.

My background couldn’t be further removed from what I’m doing today. But my background actually used to originally be in private equity back to pharmaceuticals. I spent about 13 years in the generic pharmaceutical space.

I started off in blue-chip but then transitioned to the generic space. Mainly concentrated on launching established and new drugs, heading up a compliance team in the medical division.

I did that for a number of years. And then for about seven years of my career 13-year career, I spent time working with some private equity firms who were aggressively buying and selling pharmaceutical companies.

I had a really good exposure of working with the PE companies, alongside this they supported me to do my MBA. But my interest in terms of trading had always started from quite a young age, where I’d been quite good at making and losing a lot of money along the way. But just picking different products or whether it be like ETFs or funds, whether it be managers.

So I did that you know from maybe the age of 18. Ever since, whenever I would have a bonus or make money at work, in my corporate job, I would invest that into various products or with various managers.

And I did that with varying success over a number of years. But then I left the pharmaceutical industry when we sold ourselves to a Canadian firm.

And then when I exited the business, I had done all right; I made some money out of the deal. And I thought do you know what? I’m actually going to go and seek some of the best managers I can find to help me grow the money that I had made there. And that’s what actually brought us both together. So that’s me.

Tim: Right. And Waqas?

Waqas: Yes. So I started kind of my path into owning my own business and doing something for myself quite a young age.

My father is also an entrepreneur, so I think maybe that kind of got instilled into me at a very young age. But I initially went into the real estate side of things, so my background is actually property-based.

When I graduated from university, I had some very good mentors who taught me the tricks of the trade when it comes to investing in real estate without having to have much capital, creative financial solutions. And before the 2008 crash, it was a bit like the Wild Wild West. I remember signing a million-pound mortgage while I was unemployed, and I don’t think that happens anymore.

So I kind of started there, started with my initially just to buy distressed assets and below market value assets, renting them out and basically accumulating an asset base. But I soon realized I didn’t really want to be a landlord, so I sold all that off, went into development, started with my first two-bedroom house.

And just before the crash, had worked my way into doing large five, six thousand square foot luxury homes down in southwest London in Waybridge.

However, once the crash happened, we weren’t really as investors or property developers, getting the kind of returns we were anymore because financing just wouldn’t allow it.

And so I began looking for other things to do. So in that search, I was introduced to an FX and commodities trader back in 2009/2010. That’s after me trying to do it on my own, and I remember trying to short the FTSE during the time of the hung parliament. I’m not sure if you remember; we all knew was going to happen. Everyone was trying to short the market, so was I.

And without having known how brokers work and the ins and outs of spreads, the lack of that understanding cost me I think I know to the pound, £156,821. And literally, it was an 11 or 12 point difference that meant I had that loss, versus an approximately four hundred thousand pound gain on that same trade.

So I thought I’d find someone to help me in this arena, in the space, and then that’s how I got into the world of trading. It was an FX commodities trader that was kind of the first partnership I started back in 2011.

Since then, I kind of organically grew my own experience, my own strategy until Sheetal and I met in 2017, early 2017, and started to look at doing this within a fund structure.

Tim: Right. And that’s when Narratus Capital was born and you two came together. Is that right?

Sheetal: Yes.

Tim: So maybe you could tell me a little bit more about Narratus Capital, the products you trade, the strategy you have. I think that kind of information will be quite interesting to hear.

Waqas: Sure, where do you want to start?

Sheetal: Start with the products; maybe?

Waqas: Yes, sure. So at this point in time, we trade exclusively, a systematic yet discretionary effect strategy for mainly private and private investors, family offices, and some institutions.

The strategy actually was born from initially looking as a way of earning income, really, so it was a very high-risk retail-based strategy. When I first started to look into FX trading as an investment for myself. It’s been developed over time very much via try on trial and error on my own money.

And then, slowly, I started taking on investors, which is very organic; it was mainly individuals I’d known from my property background.

Word of mouth grew my overall assets to four million dollars. At that point in time, we were completely unregulated, it was really more friends and family.

Tim: And you were doing this on a managed account basis? Is that how it worked?

Waqas: Correct. Obviously, the FX space, due to it’s popularity in the retail space, has so many different technologies that have allowed people to manage money or replicate their trading for other accounts. Which is a good thing and a bad thing; it’s a double-edged sword, in my opinion.

But it allowed me to initially start taking on money in a very kind of unstructured way from a regulatory perspective. And also because it was just really me at that time, right? So I was trading as well as managing clients, even though they were really close contacts of mine and that’s kind of where it started.

But I soon realized well, if I can start adapting this to larger funds, well, how far could I take this? My limitation really wasn’t necessarily the strategy, which again has been developed over time.

I didn’t have anyone that I’d met up until that point in time that would go toe-to-toe with me in setting up a business and growing a business. Then Sheetal and I met, and we then kind of started a journey from early 2017 to redevelop this strategy as an offering to high net worth’s professionals and institutions.

Tim: So how did you meet? I mean, did you meet with that sole intention; Did you go out looking for someone to partner-up with? Or was it more of a kind of a random meet at a conference, and you kind of hit it off and decided to partner-up?

Sheetal: So I had just left my kind of corporate career, and I knew that I always wanted to go off and do something for myself.

So I think this was the ideal opportunity for me to take time out to do that. And I happened to explore a variety of things when I left; I initially did some consulting in private equity. But I knew that I wanted to trade, and I knew that I wanted to explore FX in more detail.

It was just a personal interest of mine at that point. And I happened to go to an event, a conference and you (Waqas) happened to be speaking.

And what he had spoken about really resonated with me, and we then had some outside of the conference. We had further dialogue, and I think the more we started to get each other, I think it happened really quickly actually. I think it’s after meeting just for the first after our first occasion of meeting; I think we realized that.

We didn’t quite know what there was or what we were going to do, and we had definitely had no idea of creating Narratus Capital at this point. But we definitely knew we wanted to trade together and maybe explore building something together.

And that’s it, ever since then everything’s just really grown very much organically, and I think we just came from a place of knowing that we had maybe found somebody that we’d wanted to do business with and that we had complementary skill sets that could work with one another. And here we are today, and there’s the two of us, and then we have a team around us as well.

Tim: Right. So Waqas, in the years leading up to meeting Sheetal, I mean, you obviously came to the decision that you wanted to grow in a way, but you perhaps didn’t quite know how you’re going to do it.

But you knew this is something you wanted to do. And you also needed somebody who had both complementary skills and also skills that you didn’t have, and this is where Sheetal came in, is that right?

Waqas: Yes, right.

Tim: So, what happened? I mean, what did you do with the fund structure? At that point in time, you were doing this on a managed account basis. Did you change the structure after you met?

Waqas: So one caveat I’ll put out there before answering that question is that neither one of us really came from the industry. And that’s been both challenging but also probably quite beneficial in some cases. Because we’ve taken a very different outlook and a very different approach when we deal with clients as well, this business wasn’t really grown with the sole intent that oh, this is what we want to do.

If I’m honest with you, I think neither one of us take to trading naturally. And by that, what I mean is that is in property, for example, when you’re developing property, you’re dealing with so many different people, right? You’re dealing with builders. You’re dealing with agents, you’re dealing with this, you’re dealing with that, right?

And I think in your corporate environment, you’re always around people. I think trading for me was quite isolating. It actually took a lot out of me personally to have developed a strategy on my own over that time period, between 2013 and 2017.

So this has really come from; this business has really been driven quite personally in terms of what the vision has been and where this fits into a much larger vision for both of us.

So that kind of allowed, that aspect of this business or this partnership has allowed us to probably build relationships with certain family offices in particular private individuals who see that we care a little bit more than just numbers and being another asset manager. At the time that the challenge was well, we didn’t know where to start. And we initially kind of thought we would take the match; we wanted to get FCA regulated.

We wanted to make sure that we came across as legitimate and professional. And we started looking for different umbrellas and different service providers that could give us that solution. And we came across one and initially set up a Malta-based hedge fund, which actually never came off the ground; we spent a nice six-figure amount on setting it up.

And our first investor ended up being a U.S. family office, and a chunky investor at that who gave us our start believed in us and really pushed to working with us, which we then realized well. This structure actually became completely redundant at that point in time. And we actually went from managed accounts to thinking we’re going to set up a hedge fund back to manage accounts, all be a regulated version of managed accounts. And that’s what we run at this point in time as well.

Tim: So – I don’t quite understand, you set up this fund, you spent a lot of money setting it up. You had a client, a family office in America. So what happened that made you realize you weren’t going to go with the fund structure?

Waqas: So which will explain the situation, because we already had a substantial amount of, well four million dollars I’d imagine at that point in time to the majority of which was made up of two individuals.

Two individuals who had a chunk of that investment. And essentially after method two, that all came crashing down because our regulators basically said or our compliance department basically said well, you can’t take those funds on anymore, because they’re not classified as professional investors according to mythic two.

And hence, we thought we were going to go into this fund structure with capital already allocated and committed because we’ve already had the capital, but that all came crashing down. We had to basically find new investors.