Automated Hedge Funds Make Millions in January's Market Selloff
January 25 2016 - 7:50AM
Dow Jones News
Several hedge funds that use complicated computer programs to
guide how they trade have made hundreds of millions of dollars in
January's market selloff.
A tumbling oil price, sharp declines in global stocks and big
moves in currencies this month have provided near-ideal conditions
for commodity trading advisers, or CTAs, which run around $260
billion globally, providing the market trends and volatility they
can latch onto and profit from.
Among the winners this month are: Man Group's $4.4 billion AHL
Diversified fund, Aspect Capital's Diversified fund and Cantab
Capital' $2.6 billion CCP Quantitative fund.
While the S&P 500 has tumbled 6.7% and the euro Stoxx Europe
50 has lost 7.6% so far this month, computer-driven funds have
gained 5.3% this month through Thursday, according to early numbers
from Hedge Fund Research.
In contrast, hedge funds on average are down 3.2% this month,
after losing money last year.
"Trend-following CTAs are having a good month with short energy,
long bonds and a mix of currency positions strongly positive so
far," said Anthony Lawler, portfolio manager at GAM Holding.
Shorting means betting that the price of a security will fall in
the future.
He added that bets on the yen rising and sterling and emerging
market currencies falling had also helped.
Man Group's $4.4 billion AHL Diversified fund, which was one of
the world's best-performing hedge funds in 2014, was up 7.5% this
month through Thursday, according to data from the company,
equating to a profit of around $330 million. Its $3 billion AHL
Evolution fund has risen 4.7% over the same period.
Aspect Capital, which runs $5 billion in assets, has seen its
Diversified fund gain 5.5% this month through Thursday, said
another person who had seen the numbers, a profit of approximately
$275 million. Aspect Chief Executive Anthony Todd said in a comment
emailed to The Wall Street Journal that the fund "continues to
benefit from the downwards trends in energy prices, and more
recently the weakening of the Canadian dollar."
Another winner is Cantab Capital's $2.6 billion CCP Quantitative
fund, which has risen 10.8% this month through Jan. 15, according
to the latest numbers sent to investors, said a person who had seen
the numbers. That equates to a profit of around $280 million.
And recently-launched Florin Court Capital, which runs around
$370 million in assets and which was set up by former AHL managers,
was up 6% this month through Wednesday, having benefited from
trades in power, commodities and emerging market currencies, said
another person familiar with the fund's performance.
If CTAs hold on to this month's performance then it would mark
one of the biggest monthly returns since the credit crisis. Many of
these funds struggled over the past five years as central bank
money-printing reduced market volatility and many of the trends
that such funds like to latch onto disappeared, although the
tumbling oil price helped such funds return to profit in 2014.
Write to Laurence Fletcher at laurence.fletcher@wsj.com
(END) Dow Jones Newswires
January 25, 2016 07:35 ET (12:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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