Index provider Aquantum Group has received permission from Germany's regulator to open an asset management business, to include a base in Munich, and has announced plans for a Ucits-compliant fund for its model-driven investment strategy.
Index provider Aquantum Group has received permission from Germany’s regulator to open an asset management business, to include a base in Munich, and has announced plans for a Ucits-compliant fund for its model-driven investment strategy.
The business will provide systematic managed futures funds and managed accounts. To date, managed futures strategies, which are defined by being computer-driven, have around $320bn in them.
Joining these ranks, Aquantum plans to launch its first Ucits fund in the first quarter of 2012 using the Luxembourg platform of Universal-Investment, the largest independent investment company (KAG) in German-speaking Europe, with assets under management of €138bn.
The new asset management business will be headed up by Thomas Morrow, formerly a senior scientist at Winton Capital Management.
Morrow launched Aquantum in 2008, which proved to be a golden year for computer-driven funds.
The sector overall made 14% while hedge funds overall lost 19%, and equities markets slumped by more than 43%, according to data providers.
Last year, as the Eurozone debt unfolded and intensified, and the region’s equities markets fell by over 15%, Winton Capital Management stood out.
The computer-driven hedge fund manager Winton took a total €2.52bn into its regulated funds according to Lipper statistics. This was comfortably more than any other hedge fund Lipper screened, and in contrast to the pains at Europe’s regulated funds, which were hit by €70bn of net redemptions.
The approach Aquantum will be taking with its strategy involves applying advanced mathematical models to data in order to exploit market inefficiencies.
Aquantum can trade across a variety of asset classes and is not limited to the trend-following trading strategy, and can also engage in counter-trend trading, spread programs, pattern recognition and machine learning.
Morrow said: “Given the popularity of our indices, the establishment of a full-scale asset management business is a natural next step.”
Christian Schneider (pictured), Munich-based partner with the firm, said it is a good time for allocators to consider systematic strategies such as Aquantum’s, for a number of reasons.
“The major features that appear in this arena are liquidity and low correlation to traditional asset classes. And of course with the Ucits [framework] you have a higher level of regulatory relief. [Allocators] can speed up internal processes tremendously.”
He also mentions the aspect of ‘crisis alpha’ and ‘tail risk hedge’ inherent in many managed futures strategies. This showed itself in the crisis year of 2008.
“It is the ideal product to be prepared” for such difficult times, Schneider says.
“It can go long and short in response to prevailing market conditions, which gives it a very good positioning in good and bad times.”
In the Ucits fund, Aquantum’s strategy will be active in about 50 markets, but not in commodities. Aquantum could use a commodities index to reflect commodity exposure, but for now it has decided against this.
Schneider said, however, that commodity exposure will be offered in managed accounts. For such segregated accounts clients can also ask for various modifications of the main strategy.
The minimum commitment from institutional investors in the Ucits fund will be €500,000, whereas there is no hard-and-fast minimum for managed accounts, Schneider said.
Thomas Morrow’s establishing of Aquantum after leaving Winton will, in one sense, continue a trend set in motion by his former employer and the founder of Winton CM, David Harding.
He was the one of three mathematicians, who had sold their AHL strategy to Man Group, who then established his own boutique. Winton now runs nearly $29bn, making it Europe’s fourth largest hedge fund.
Much of the success of Europe’s largest hedge fund manager – Man Group – is thanks to its AHL computer-driven strategy, to which Harding contributed not only his knowledge and insight, but also the first letter of his surname.