Computer-driven hedge fund Density to shut down By Reuters Tuesday, October 08, 2013 Email this story | News Tracker | Reprints | Printable Version LONDON (Reuters) Sweden-based hedge fund Density is to close after a poor performance, its manager told Reuters on Tuesday [Oct. 8], as computer-driven funds struggle to cope with markets dominated by central bank money-printing. Density's troubles reflect those of high-profile computer-driven (also known as commodity-trading advisor or CTA) funds such as BlueCrest's BlueTrend, Man Group's AHL and Cantab Capital's CCP fund, which have also suffered losses as central bank actions disrupt the long-running market trends they like to follow. The Density fund, which traded 138 markets in stocks, fixed income, currencies and commodities, had been run as a strategy in Swedish-based Brummer & Partners' Nektar unit, which manages the $4.7 billion Nektar fund, a portfolio that has made money every calendar year since 1998 apart from in 2008. Density launched on its own in 2008 and made large profits around the time of Lehman Brothers' collapse. But the portfolio, which grew to around $54 million in size, has struggled in recent years, losing 14.9 percent in the first nine months of this year. "Performance has not been what we hoped for," Jonas Vikstrom, managing director of Vikstrom & Andersson Asset Management and co-manager of the Density fund, told Reuters. "It's been quite bad actually. "We aim for a niche in the CTA space but it's not worked out well at all ... We don't have the resources to continue fighting," Vikstrom said. Since the end of 2008 the Density fund has fallen around 26.6 percent, according to a fund fact sheet seen by Reuters. In a letter to investors seen by Reuters, Vikstrom said the fund would close by the end of the month. By Laurence Fletcher
Central bank influences are not an excuse for losing money. These are pitched as absolute return funds, not trend following when the trend suits us.
There are now so many articles all over the popular press and internet about what a failure CTA funds are that they are poised to make huge returns. Think like an investor, not like a sheep.
that is an insufficient reason. you will lose your shirt if you think that popular press is near all there is to be a profitable contrarian.
Volatility will return at some point. And these funds would have printed money had they still been around. Market sentiment can change pretty quickly.
Excellent points. My question is What time frame do these CTAs operate in? " central bank actions disrupt the long-running market trends they like to follow." Granted you don't want your CTA to be some daytrading high-roller but if the, say, eom (end-of-month) time frame isn't working out,, where's the harm in dropping down to eow or even eod as necessary?
CTA funds are not making money for one simple reason: for the last 5 years or so there has been no <i>uncorrelated directional</i> volatility across futures markets. The solution? Wait for it to come back, and voila, CTA will once again be very profitable.