Cantab closes 'black box' fund to new money

LONDON Thu Nov 8, 2012 8:17am EST

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LONDON (Reuters) - Computer-driven hedge fund Cantab Capital Partners has closed to new investors because it is not confident it can deliver the same returns with more money.

Cantab, set up by a former Goldman Sachs (GS.N) partner and based in the English university city of Cambridge, has seen its assets soar to $4.5 billion (2.8 billion pounds) after years of inflows and strong performance at its flagship fund.

"The strategy is currently at the optimal size for us to continue delivering attractive risk-adjusted returns to our investors," Ewan Kirk, who launched Cantab in 2006 with $30 million in assets, said in a statement on Thursday.

Cantab may start returning money to existing investors if the assets grow beyond their current size.

The decision to close the fund to new money comes at a tough time for computer-driven hedge funds.

October was one of the worst months for the sector since the start of the credit crunch in 2007, with big-name funds such as Winton Capital, Man Group's (EMG.L) AHL, Aspect Capital and Cantab all losing money across multiple markets.

While Cantab's CCP Quantitative Fund has returned 8.41 percent in the first ten months of this year, the average so-called commodity trading advisor - one of the biggest types of computer funds - is down almost 4.5 percent this year, the Newedge CTA Trend Sub-Index shows.

CTAs use complex algorithms designed by dozens of scientists to spot and bet on money-making opportunities across markets.

Computer-driven funds have seen explosive growth since the financial crisis, driven by institutional investors wanting exposure to strategies less correlated with traditional asset classes such as bonds and stocks.

But choppy and trendless markets have made it difficult for CTAs to make headway. The average fund is headed for its third year of losses in four, according to Hedge Fund Research.

Kirk, a mathematician, previously headed the European business of Goldman Sachs Strategies Group where he was responsible for the bank's quantitative technology.

He started Cantab, which has a team of 37, along with Erich Schlaikjer, also a Goldman Sachs alumnus, and Chris Pugh, formerly of KBC. (Editing by Erica Billingham)

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