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Bloomberg Markets

Small Firm, Big Results

Article by Richard Blackden, August 2003

Wallwood Consultants Ltd., the top-ranked forecaster of seven currency pairs, is hardly a household name. Co-founders Mario Kelly and Daryl Swain run their five-year-old currency investing business from their home computers and manage just $4.5 million for 14 clients - all of them private investors. Swain and Kelly, who met with their clients at the ornate Institute of Directors near Buckingham Palace, named their firm after a street in Kelly's neighbourhood in East London.

Both Kelly and Swain were currency traders at Currency Management Corp. in London before striking out on their own in May 1998. They issue forecasts for their clients and execute spot trades in the euro-US dollar and dollar-yen markets through several brokerage firms. Wallwood has no research department and doesn't subscribe to proprietary databases; Kelly and Swain use information publicly available on the Web.

The results speak for themselves: Wallwood had an average margin of error of 3.79 percent for seven currencies tracked by Bloomberg, beating out No. 2 Standard Chartered Plc, No. 3 Travelex Plc and No. 4 American Express Co. Its track record was best on the euro-dollar exchange rate, placing seventh out of 56 firms. It was least successful in tracking the dollar-yen rate, placing 26th.

Kelly and Swain got their start training wealthy investors in how to trade currencies. "It was very basic stuff", says Kelly. "Some people didn't know the difference between a bid and an ask price." The two soon realised their customers also wanted to know where the dollar, euro and yen were heading. In August 1999, the company secured regulatory approval to give advice and make forecasts. Then, in December 2000, Wallwood won approval to trade currencies in accounts that clients open at brokerages such as Man Group Plc's GNI unit.

To make their forecasts, the partners plot currency rates on charts that help predict future fluctuations. Like other technical analysts, they try to identify the levels at which a particular currency has found support - that is, where buyers outnumber sellers - and where it meets resistance - where sellers prevail.

Since January 2001, Wallwood has returned customers an average of 20 percent, says Kelly. And thats a good thing: The pair charge their clients only if they make money.