16 June 2019

Traders Beat Computer-Driven Hedge Funds

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According to data group Hedge Fund Research, the $272 billion computer-driven sector—also known as CTAs for commodity trading advisers—is on a three-month losing streak. These funds are down 1.8% so far this year to the end of June. They had gained 5% by the end of the first quarter of this year, after a 10.7% advance for all of last year. In contrast, macro funds—which use human judgment to make trades, often betting on a similar range of assets to CTAs, including stocks, bonds, commodities and currencies—have fared better in the past three months. Having last year lagged behind CTAs, macro funds as a whole are down 0.3% so far this year. On average, the wider hedge-fund industry is up 2.5%.

Factors hurting these funds included a wobble in U.S. rates because of “mixed messages” from the Federal Reserve, fears Greece would leave the eurozone indirectly hitting stocks and German bund yields, price spikes in some agricultural commodities due to U.S. floods and sharp drops in the Chinese stock market, he said.

Among computer funds posting a sharp downturn in performance is Man Group’s AHL Diversified fund. Following a 33.9% gain in 2014, it was up more than 8% by the end of this year’s first quarter, according to performance data reviewed by The Wall Street Journal. But recent losses have reduced it to a 6.3% loss for this year to July 13, according to data from the firm. It was hit in the last week of April, when both European bond yields and the euro spiked, and in June when stocks fell on worries about Greece, the euro rallied and then fell and corn prices shot up, said a person familiar with the fund’s performance.

Two computer-driven funds run by Winton Capital Management Ltd. also are down this year, having been up by more than 5% in early April. The flagship $12.3 billion Winton Futures fund is down 0.7% this year to July 13, according to a person familiar with the numbers, while the smaller Winton Evolution Fund is down 1% this year to that date. Gains of more than 1% this month have helped both funds pare losses. Cantab Capital Partners LLP’s $2.7 billion CCP Quantitative Fund was up more than 13% at the end of March, according to performance numbers reviewed by the Journal. But after sharp performance losses, the fund is down 5.6% this year to July 3, said a person who had seen the numbers.

However, some computer-driven funds are thriving. Secor Asset Management LP’s $210 million Secor Alpha Fund, a computer-driven global macro fund, gained 1.9% in June, taking gains in the first half of the year to 10.1%, according to a letter to investors obtained by the Journal. The fund, which rose almost 31% last year, made money from trading bonds as the Greek debt crisis unfolded and from rising grain prices and betting against U.K. stocks, among other things, according to the letter.

Click here to access the full article on The Wall Street Journal. 

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