| LONDON, April 4
LONDON, April 4 Some of Europe's biggest
computer-driven hedge funds have failed to profit from the stock
market's rebound in 2012, once again frustrating investors in a
sector that has sucked in tens of billions of dollars in assets
in the wake of the credit crisis.
The so-called managed futures or CTA (commodity trading
advisors) sector - dominated by names such as $29 billion Winton
Capital, $21 billion AHL and $13.6 billion BlueTrend - uses
highly complex algorithms to try and latch onto and profit from
market trends, either up or down.
These funds might have been expected to profit from the 7.2
percent rise in the Euro STOXX 50 that has lifted
most other hedge funds, after the European Central Bank's 1
trillion euro cash injection to head off another credit crunch.
However, as in the March 2009 rally, some CTAs' algorithms
haven't taken advantage of the sudden rebound in equities, while
they have also being caught out by choppy, volatile commodity
markets. AHL said this week it was hit by a fall in
This has left these portfolios, which tend to be more
volatile than most other hedge funds, down 3.9 percent this year
on average, according to Hedge Fund Research's HFRX index.
Whilst all these funds' trades are decided by computers, the
losses nevertheless highlight the difficulties the programmers
who build these models can face when deciding whether to focus
on shorter-term market trends, which can whipsaw investors, or
longer-term trends, which can be hard to spot early on.
The losses also add to the frustration of some investors who
had been attracted by CTAs' 18 percent gains in 2008, during the
worst of the credit crisis, but who have seen many funds in the
sector lose money both last year and in 2009.
"It's not been a fantastic area and I have to say we are a
little disappointed (with CTA returns)," said a London-based
fund of funds investor who has been investing in CTAs for more
than 10 years, speaking on condition of anonymity.
The lacklustre performance comes just as the hedge fund
sector as a whole is rebounding from a frustrating 2011, gaining
3.1 percent so far this year with some star names delivering
high double-digit gains.
In contrast, among the biggest CTAs, BlueTrend, part of fund
manager BlueCrest and headed by Brazilian-born Leda Braga, is
down 2.5 percent so far this year, according to figures seen by
Reuters. AHL is up 0.7 percent, while Winton - set up by David
Harding, the 'H' in AHL - has seen its main Futures Fund lose
"CTAs are having a bit of a tougher time," said Morten
Spenner, chief executive of fund of funds firm International
"For years it's been a bit tricky. Some people are
scratching their heads ... and thinking 'it would be a good year
for them to perform'."
MISSING THE PERFORMANCE
One CTA industry executive, who asked not to be named, said
that markets were offering few opportunities for these funds to
"Nothing's really happening at the moment," the executive
said. "The situation in 2009 was very similar. Equity markets
did well in March and most CTAs didn't catch the equity boom."
Managed futures funds tend to do best from long-standing
trends in futures markets. This was seen clearly in 2008, when
stocks fell whilst the oil price rose in the first half of the
year then fell in the second half, helping funds to an 18.1
That performance, when most hedge funds were suffering heavy
losses, helped the industry suck in tens of billions of dollars
in assets. According to HFR, assets in the macro sector, which
it defines as including CTAs and global macro funds among
others, have swelled nearly 60 percent since 2008.
However, the sector has endured a frustrating time since
then, with many funds failing to provide gains during last
year's turbulent markets for investors who had bought them to
hedge positions in other types of funds.
Some funds have also cut risk to attract clients, which
reduces potential losses but also makes it harder to deliver the
type of profits seen in 2008.
AHL fell 6.4 percent last year after its algorithms found it
hard to cope with rapid changes in market direction. Tulip Trend
fund was down 20.9 percent, although it is up nearly 8 percent
this year, while the largest subset of Rotterdam-based
Transtrend's Diversified Trends strategy was down 8.6 percent in
2011 but is also up this year.
Winton was a stand-out performer last year with a 6.3
"We mustn't forget that many of these new investors that
have helped the growth came into the CTA market after 2008,"
said Christoffer Dahlberg, managing director at Finnish-based
Estlander Partners, which manages $1 billion, speaking at last
week's CTA World Congress in London.
"You haven't really seen the tremendous performance you may
have been expecting when you entered the market. So I think it's
very important for us as an industry that we show in 2012 our
ability to perform."