Is It Possible to Pursue Returns Without Predicting Market Direction?

Predicting which direction the market will move tomorrow is difficult. But what if you didn’t have to know the market’s direction to pursue returns?

Predicting which direction the market will move tomorrow is difficult. But what if you didn’t have to know the market’s direction to pursue returns?

During periods of sharp market fluctuations and rapidly shifting expectations, the biggest question on investors’ minds is usually the same: “Where will the market go next?” Yet there is a different approach in investing—one that does not rely on knowing the answer to this question.

Arbitrage strategies monitor the very short-lived price differences that emerge between the spot and futures markets for BIST 50 stocks. Rather than predicting where the market is headed, they aim to generate returns from these pricing discrepancies.

In other words, the story begins not with “Will the market rise or fall?” but with “Which price difference occurring right now could become an opportunity?”

Tracking Price Differences, Not Market Direction

The logic behind arbitrage is actually quite simple.

The same or closely related financial assets may not always be priced in perfect equilibrium across spot and futures markets. When market activity intensifies, brief discrepancies can emerge between these prices.

Statistical arbitrage strategies use advanced algorithms and data analytics to identify these discrepancies and aim to capitalize on them through simultaneous positions.

Therefore, the market does not need to move in a particular direction for the strategy to pursue returns.

This is because the strategy is based less on forecasting market direction and more on capturing temporary pricing inefficiencies. As a result, arbitrage funds can be managed with an absolute return objective, independent of overall market direction.

Why Do Volatile Markets Matter?

When markets are calm, price discrepancies may also be more limited. However, the picture changes as volatility increases.

News flow accelerates, investors trade more actively, and prices in spot and futures markets begin to move much faster. This increased activity may create the conditions for price differences that arbitrage strategies can potentially capture.

For traditional investors, volatility often means uncertainty. For arbitrage strategies, however, it may also represent an environment in which potential opportunities can emerge.

Furthermore, in some arbitrage strategies, positions are opened and closed within the same trading day, with no open positions carried overnight. This can help support an absolute return objective that is less dependent on market direction.

The Conversation Is No Longer About Seconds, but Nanoseconds

This is precisely where technology comes into play in today’s arbitrage landscape.

Some pricing discrepancies appear and disappear far faster than a person could notice them on a screen and make a decision. Thanks to advances in technology and high-speed trading infrastructure, financial market data can now be processed—and trades executed—on a nanosecond scale rather than in seconds.

Advanced algorithms analyze large volumes of market data simultaneously. When a pricing discrepancy that meets predefined criteria emerges, they can identify it at extremely high speed and activate the relevant trading strategy.

These time intervals, too brief for the human eye to perceive, form the operating environment of technology-driven arbitrage strategies.

Investment decisions are therefore based not solely on intuition, but on data, mathematical models, speed, and discipline.

BV Portföy applies this approach across its arbitrage and absolute-return-focused funds to address different investment needs.

BVZ – Statistical Arbitrage Hedge Fund

BVZ places statistical arbitrage at the core of its investment strategy.

The fund aims to identify and capitalize on short-term pricing discrepancies in spot and derivatives markets through advanced algorithms, data analytics, and high-speed trading infrastructure.

By closing positions within the trading day, the fund aims to avoid carrying open equity positions overnight, thereby limiting its exposure to overall market direction.

In short, BVZ’s central question is not “Which direction will the market move tomorrow?” but “Which price discrepancies are emerging today?”

BHI – Equity-Intensive Absolute Return Hedge Fund (TRY)

BHI combines an equity-intensive fund structure with an absolute return objective.

It aims to capitalize on opportunities independently of market direction by combining fundamental and technical analysis, algorithmic models, and arbitrage strategies.

One of BHI’s key distinguishing features is its 0% withholding tax advantage under current tax regulations, resulting from its equity-intensive fund status.

This allows investors to access active management and an absolute return approach within an equity-intensive fund structure.

BIS – Investing in TRY with a USD-Based Absolute Return Objective

BIS – First Hedge Fund applies the same approach to a different investment need.

Investors subscribe to the fund in Turkish lira, while the fund pursues a USD-based absolute return objective. It implements arbitrage and long-short strategies in global markets while actively managing currency risk through foreign-exchange derivatives.

Rather than linking performance solely to movements in the USD/TRY exchange rate, BIS aims to generate USD-based returns by capitalizing on a range of opportunities across global markets.

This makes the fund an alternative investment approach for individual investors seeking USD-based returns, as well as institutional investors with foreign-currency liabilities.

Sometimes the Opportunity Lies Not in the Market’s Direction, but Between Prices

For years, investors have asked the same questions:

Which direction will the market move? What will happen to interest rates? Where is the dollar headed?

Arbitrage asks a different question:

Regardless of which direction the market moves, is there a price discrepancy we can capitalize on right now?

This may be precisely what makes arbitrage strategies particularly compelling during volatile periods when market direction is difficult to predict.

The objective is not to predict the future, but to capture opportunities emerging in the market today through technology and discipline.

BV Portföy addresses different investment needs through BVZ’s statistical arbitrage strategy, BHI’s absolute return approach within an equity-intensive structure, and BIS’s global arbitrage strategy with a USD-based absolute return objective.

Knowing the market’s direction may not always be possible. But an investment strategy does not have to rely solely on predicting it.