Winton’s Hedge Fund Posts Worst Month Since 2008

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Winton Capital Management, the $30.9 billion investment firm that uses computer algorithms to trade, posted its largest monthly loss in seven years at its biggest hedge fund as markets turned in the final days of April.

The $12.4 billion Winton Futures Fund lost 4 percent last month, cutting its gain this year to 0.5 percent, the London-based firm said in an investor letter, a copy of which was obtained by Bloomberg News.

“There were some surprises in store for the last two days of the month, with a decent selloff in stocks, bonds and the dollar together with a rally in crude oil,” Matthew Beddall, Winton’s chief investment officer, wrote in the letter.

Beddall said losses came mainly from currencies and energy holdings, as the dollar’s rally took a hit and oil, which had been plunging, had its best month since May 2009. Last month’s decline was the biggest for the Winton Futures Fund since July 2008, when it fell 4.6 percent, according to the letter. Winton was founded by David Harding, 53, in 1997.

Beddall said in the letter that it and similar funds had benefited previously from “strong trends” in markets, including a rally in the German government bond market. The reversal of that rally was “the epicenter of the month end drama,” he wrote, without saying whether it lost money on the trade, or changed its positions. Fixed income overall contributed a “relatively small fraction of the total losses” as the fund’s holdings in those assets had declined from six months earlier.

Interest Rates

“Is the Bund ‘the short of a lifetime’ and in the middle of an irrational bubble? Sadly, we do not know. Our computer has no ability to make big macro calls and will be taking each day as it comes,” Beddall wrote.

Beddall said that if interest rates in Europe or the Americas start to rise gradually, then there will be plenty of time for Winton’s computer models to reduce its holdings, lock in profits and start betting against bonds.

“What would be more ‘problematic’ are short, sharp and sudden price movements,” he wrote in the letter.

Stock index positions “gave up some of their earlier gains in the selloff, but still managed to post an overall profit at month end,” Beddall wrote. Wagers against gold provided a “safe haven” in the final two days of April.

A Winton spokesperson didn’t return telephone messages or an e-mail seeking comment.

(An earlier version of this story corrected the hedge fund’s assets in the headline.)

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