NEW YORK – Konstantinos (Gus) Tsahas’ story is another example of the beauty of entrepreneurship. Develop an idea, meet a need, collect your rewards – after a lot of hard work and some luck.
Tsahas, an electrical engineer who lives in Searingtown, NY, and Robert Terpilowski, a software engineer in Seattle, co-founders of Zoi Capital, also illustrate how the internet spawns creativity and economic activity across vast distances – a hopeful development not only for individuals, but even entire countries, like Greece.
They met on an online forum around 2000 working on similar trading strategies and with their complementary skills sets they generated valuable ideas and solutions.
In their case, they developed algorithms and models for futures trading and their company is a commodity trading advisor (CTA).
“We trade futures instruments for other people. They give us authorization to trade their accounts,” he told TNH.
Tsahas emphasized that “the client’s account is held at the broker of their choice in their own name. This model has the most transparency for the customer as after Madoff and it became apparent that clients were lied to about the value of their accounts.”
They are developing a niche that has opened up because many people are finding it harder and harder to find good, secure returns on their investments.
“Making money is harder than it sounds,” Tsahas said, but if person does not want to invest more money into volatile stocks or illiquid real estate “he can go into managed futures, a program like ours, and have a diversified asset.”
Their systems are built on a foundation of human nature: people tend to overreact to good or bad news, and so do market participants. In the context of statistics, their strategy is called mean reversion, based on the assumption that the futures contract will tend to move to the average price over time.
“By using computer algorithms and trying different strategies,” he said, they developed models whose predictions they could “back-test” on historic data.
Their motto is “if we can’t test it we won’t trade it.”
“Over a long period of time we have a positive expectation that we will make money for our clients and remain lowly correlated to stocks and bonds,” Tsahas said.
In a December 2014 article Futures magazine reported that their Telio program “produced a compound annual return of 20.36 percent since April 2010…Telio has a four-point risk management strategy. They exit a market in five days if a trade does not revert to the mean.”
George Panagopoulos is Tsahas’ nephew and handles marketing. He explained that “We are running the strategy in your account for a fee.”
Clients come in at a minimum level of $100,000 although the strategy is a better fit for larger portfolios and one of the attractions is liquidity.
“It’s not like a hedge fund where your money is locked up for years. If you are not happy with us, you can revoke trading authorization the next day. We have $2 million of our own money invested…and are winning and losing with the clients together, our interests are on the line with the client’s,” Panagopoulos said.
They first focused on stocks but discovered that their system was more effective in futures markets.
In 2007 they moved to futures trading with contracts in metals, energy, agriculture, currencies, interest rates and equities,
Asked how he and Terpilowski made the leap into financial markets model building he said “we are both engineers…experienced problem solvers. We spent five or six years doing models and trading and gaining experience.”
In 2004 Tsahas went back to school. When he added masters in financial engineering in 2007 to master’s degrees in management and electrical engineering, he started up Zoi Capital.
Tsahas arrived in America when he was 10 years old. His wife Patty is Greek and Cypriot. “Her father grew up 200 yards from my dad on Ikaria. I met her as our parents were visiting each other’s houses.”
Tsahas and his sister Dimitra grew up in Flushing and he studied electrical engineering. His first job was with MCI and as computerization took over Wall Street he worked at Lehman Brothers from 1986-91.
After leaving he became a contractor, beginning by laying fiber optics cables, but he stayed involved with the market and when electronic trading became available to semi-professional people, opportunities opened up
Zoi Capital is currently a small operation of about five people, including Tsahas’ wife, who handles the administration.There are also independent ”introducing brokers” who are promoting their products to potential clients.
Zoi Capital’s offices are at 1981 Marcus Avenue in Lake Success, NY. “People can feel free to come in and sit down with us,” and talk about their financial needs and how the program works Tsahas said.
Tsahas ended the conversation with free advice. “People don’t have to come to us, but they should be thinking about diversification as the best way to manage their wealth.”