Hedge funds using computer algorithms to trade on market trends started 2015 with some of the industry’s highest returns as volatility in currencies, commodities and bonds surged. They’re also starting to win back investors.
Leda Braga’s Systematica Investments, Man Group Plc’s AHL Diversified and AHL Evolution, Lynx Asset Management AB and Stanley Fink’s ISAM Systematic Fund all rose through Jan. 16, the day after the Swiss franc surged on the central bank’s surprise decision to remove a cap on its currency.
Stung by three years of poor performance at quant funds, investors began allocating money to the strategy again in December, with more than $1 billion in new investments after 15 consecutive months of redemptions, according to eVestment, a data provider. The inflows followed record gains at quant firms in the second half of last year.
ISAM has returned about 11 percent this month, including a 7 percent jump on the day the Swiss franc’s cap against the euro was removed. Systematica, the $7.7 billion firm spun out of BlueCrest Capital Management this month, returned 7 percent through Jan. 16, while AHL Diversified rose 4.75 percent and Evolution 6.6 percent through Jan. 21, according to a person familiar with the matter.
Previous underperformance had been blamed in part on central bank interventions that altered the expected movements of security prices. The funds’ computer models try to predict and capture profitable moves in stocks, bonds and commodities.
Lynx, which generated a 27 percent return last year, is up 4.1 percent through Jan. 16. Cantab Capital Partners’s main fund ended 2014 up 39 percent, while ISAM Systematic returned 62.4 percent last year. Winton Capital Management is also up this year.
Newedge’s global head of alternative investments, James Skeggs, said the firms are benefiting from “sustained movements in commodity, bond and currency markets.” Newedge’s CTA Index, which tracks 20 large trend-following funds, has risen about 2.5 percent this year as of Jan. 21.
Investors pulled about $32 billion from quant funds in 2013 and $5.5 billion in 2012, according to eVestment. The last year with positive inflows was 2011, when $11.7 billion was allocated to quants.