Faith in computer-driven funds shaken as top trader suffers loss

Philanthropic financier who inspired bestselling novel sees value of his $10bn fund plunge 3.5 per cent in 2012

David Harding, the Cambridge physicist turned super computer trader, has some explaining to do to his extremely wealthy clients after recording a rare plunge in the value of his fund.

The entrepreneur and philanthropist, said by some to be the hedge fund hero on which the lead character in Robert Harris's best-selling Fear Index was based, saw his $10bn (£6bn) Winton Futures Fund lose 3.5 per cent last year.

That's only its second ever annual loss since launch in 1997. While that's an impressive record, it will raise questions among investors about whether Mr Harding's venture is as infallible as it had previously seemed.

Mr Harding is one of a new breed of investors who devises software programs to trade markets, setting up banks of computers to follow trends in markets often at high speed.

Figures reported by Bloomberg today show that the whole computer trading industry – often called quant trading – had a tough 2012, suggesting that their ability to beat markets with such apparent ease may be a blip.

The value of the quant funds, which have attracted more than $100bn of investor funds since 2008, fell by 3.4 per cent in 2012 after a 7.9 per cent slump in 2011, figures from the broker Newedge revealed.

The computer-driven funds were blind-sided by market uncertainty caused by Europe's sovereign debt crisis and the US fiscal cliff talks, experts said, raising fears that investors may now pull out billions in funds.

Mr Harding, who is Britain's second wealthiest hedge fund manager with an estimated £900m fortune, is also known for making donations through his Winton Charitable Foundation.

A spokesman for Mr Harding played down suggestions that computer-driven hedge funds were a thing of the past. "It's always disappointing when we're down, but it's important to remember that this is only the second time it has happened in 16 years," he said.

One hedge fund under intense pressure to improve its performance is Man Group, which endured a torrid 2012. The company's $17bn AHL computer-driven fund has been blamed for the company's poor recent performance. Its flagship AHL Diversified Fund fell 2.1 per cent last year.

Peter Clarke, Man Group's chief executive, announced his departure last month after the company's third-quarter results showed outflows had surged 57 per cent in stark contrast to its 2007 and 2008 highs. Mr Clarke leaves in February and will be replaced by Manny Roman.

Jason Streets, an analyst at Jefferies, predicted that 2013 could be just as bad. He said: "October, November and December all saw continued outflows in AHL … we see no reason not to expect this trend to continue as a central expectation. The story remains unenticing to our eyes."

Start your day with The Independent, sign up for daily news emails
Sport
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing