Cantab Extends Decline on Bad Bets on Equities, Dollar

Aug 07, 2014 11:57 am ET

(Corrects BlueTrend returns in fifth paragraph of story first published yesterday.)

Aug. 6 (Bloomberg) -- Cantab Capital Partners LLP, the hedge-fund firm co-founded by former Goldman Sachs Group Inc. head of quantitative trading Ewan Kirk, lost 6.8 percent in its main fund this year after a decline of 28 percent in 2013.

The fund, Aristarchus, dropped 4.6 percent in July on losses from a U.S. dollar rally earlier than it expected and a sell-off in the equities markets, the firm said in a letter to investors seen by Bloomberg News. That reversed gains in May and June at the Cambridge, England-based firm.

“Despite starting the month in a strong fashion and making gains across the board, the sudden rally in the U.S. dollar and weakness in equities at the very end of the month left the fund down a very disappointing 4.6 percent,” the firm said in the letter.

Cantab, which manages $2.9 billion and uses computers and mathematical algorithms to spot trades, has slumped more than most major computer-driven hedge funds. The Newedge CTA Index, which tracks the performance of the largest computer-driven, or quantitative funds, has risen 0.2 percent this year.

BlueCrest Capital Management LLP’s BlueTrend fund is up 3.9 percent this year after dropping 2.1 percent in July, according to a report to investors. Man Group Plc’s AHL Diversified and AHL Evolution funds have gained about 10 percent. Winton Capital Management Ltd.’s Futures fund is down 1.4 percent this year.

Babbage Fund

Cantab’s Babbage fund, which has less volatility than the 20 percent targeted by Aristarchus, declined about 2.3 percent in July and is down 3.3 percent this year, according to the letter. Cantab’s Core Macro Fund, which has about $625 million in assets, is up 4.6 percent this year, according to a person with knowledge of the returns, who asked not to be identified because the information is private.

Aristarchus rose 13 percent in 2011 and 15 percent in 2012. The fund’s annualized return since its inception is 4.5 percent, according to the letter.

The fund added two new equities strategies at the beginning of July, including one that bets that stocks with low risk will outperform ones with high risk. The other focuses on how changes in analysts’ views impact the market, according to the letter.

Kirk, who has a doctorate in mathematics from England’s University of Southampton, led a team of 120 employees at Goldman Sachs focused on quantitative investing before he founded Cantab in 2007 with $60 million. Cantab initially paid Goldman Sachs a fee for the use of its technology and converted that arrangement into a minority stake for the New York-based bank in 2012 after building its own systems.

Cantab was co-founded by Erich Schlaikjer, now its chief technology officer and formerly European CTO for quantitative strategies at Goldman Sachs.