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> Currencies and bonds fire quant funds to big rallies
> By Sam Jones in London
> Published: October 12 2010 22:30 | Last updated: October 12 2010 22:30
> Some of the world’s biggest quantitative hedge funds are enjoying a
> big surge in returns on the back of sustained moves in the world’s
> currency and bondmarkets in the past few weeks.
>
> So-called trend followers, including the London-based trio Winton
> Capital, BlueCrest and Man Group, have seen two months of peer-
> beating performance numbers for their flagship quant funds and are
> on course for a third strong month.
>
> For some, the recent strong performance marks a comeback for the
> strategy after a painful summer and a difficult 2009, when many
> quant fund models were wrong-footed by the distortions that
> quantitative easing had on investor behaviour in bond and currency
> markets.
>
> Man Group’s AHL – at $21bn one of the largest single funds in the
> world – is already up about 8.22 per cent so far this month,
> according to a person familiar with its performance. The fund has
> made “stellar” returns shorting the US dollar, they said.
>
> “In 2009 it was only stocks that trended,” said Keith Balmer, a
> portfolio manager at AHL, “whereas this year it has been across the
> board: bonds, rates, currencies, metals, commodities.” The fund –
> criticised by some at the start of the year as being broken – is up
> about 17.95 per cent since January.
>
> The $16bn Winton Capital fund has meanwhile delivered similarly
> strong returns across its trend-following strategies. Its flagship
> futures fund was up 10.13 per cent as of the end of September, an
> investor says. This month the fund is up about 2 per cent. The fund
> has made big gains from trades in corn and wheat futures markets in
> the past few days.
>
> EDITOR’S CHOICE
> In depth: Hedge funds - Oct-12
>
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> Quants fail to live up to expectations - Sep-26
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> Relative value advocate shows strategy’s worth - Sep-26
>
> Other strong performers include BlueCrest Capital’s $11.4bn quant
> fund BlueTrend, which has returned 8.34 per cent so far this year
> and Renaissance Technologies’ RIFF fund, which has returned 16 per
> cent.
>
> Currency-focused quant trades have fared even better. Ikos, the
> Cyprus-based fund manager run by Elena Ambrosiadou, saw its FX fund
> return 9.2 per cent in September alone, putting it up 30 per cent
> for the year.
>
> “Systematic managers have done particularly well in fixed income, FX
> and commodities trading,” said Jeff Holland, a partner at Liongate,
> which has about $3bn invested with hedge funds. He said that quant
> funds had made large amounts from “significant and sustained”
> rallies in interest rate futures thanks to central banks’
> commitments to low rates.
>
> Traders caution that another unpredictable event such as April’s
> Greek debt crisis could yet disrupt trend followers’ performance,
> but that the longer-term outlook was positive.
>
> “Look at interest rates, they are as low as they can go, and at some
> point in the future ... they will all have to start moving up in
> lockstep. That will present a phenomenal opportunity for trend
> followers,” said one hedge fund investor.
>