Ikos Co-Founder Coward Starts New Fund With $270 Million

Martin Coward, who left the firm he helped create in an acrimonious split with his wife and co-founder Elena Ambrosiadou, is seeking to raise money at a time that quantitative hedge funds are underperforming the market.

Starting tomorrow, the former Goldman Sachs Group Inc. currency strategist and mathematician, who partnered with his wife to build Ikos Asset Management Ltd. to as much $3.5 billion in assets using computer models he developed, will begin accepting money from outside investors, Coward said in a telephone interview.

His Malta-based firm, called dormouse, has been trading since July 2011, using his own money and that of two undisclosed investors, Coward said. The quant firm manages about $270 million and will seek to grow to about $1 billion in three years, he said.

“We’re not expecting to be overwhelmed,” Coward, 56, said. “Obviously it’s a difficult moment for CTAs,” or commodity-trading advisers like dormouse that buy futures contracts and other derivatives on stock market indexes, commodities, currencies, interest rates and bonds.

Computer-driven funds run by companies such as Man Group Plc and BlueCrest Capital Management LLP saw investors pull $4.9 billion in the last three months of 2013, the most in five years, according to Chicago-based data provider Hedge Fund Research Inc.

Funds Underperform

Hurt by central banks’ efforts to stem the global financial crisis through quantitative easing, or the purchasing of bonds and other financial assets from commercial banks, these funds, sometimes called trend-following strategies, have underperformed markets for three years. The Newedge CTA Index climbed 0.7 percent last year after two years of losses. The Bloomberg Global Aggregate Hedge Fund Index increased 7.4 percent in 2013.

Coward said dormouse fell 6 percent last year after rising 6 percent in the second half of 2011 and 18 percent in 2012.

The firm has 10 employees, mostly researchers and traders, and expects to expand to about 20 people, Coward said. In addition to its Malta base, the firm plans to open a London office, which will house marketing employees and researchers, in the spring, he said.

“We want to keep it relatively small,” Coward said.

Coward and Ambrosiadou, 55, started Cyprus-based Ikos, one of the first quantitative hedge-fund firms, in 1992 and ran it together until 2009. After he left, the two sued each other, alleging spying and stealing. The breakup spawned more than 40 lawsuits in at least four countries.

Business Partners

When they were together, Coward, a Cambridge University-trained mathematician, led the team that developed Ikos’s computer models and Ambrosiadou, as chief executive officer, ran the business, overseeing client relations and sales.

One of the firm’s strategies, the currency-focused Ikos FX Fund, rose 18 percent in 2009, Coward’s last year, according to data compiled by Bloomberg. The average managed-futures fund fell 4.3 percent that year, according to Newedge.

In lawsuits and divorce proceedings, the couple fought over items ranging from who owns the rights to Ikos’s computer models to allegations that surveillance specialists were used to bug homes. In May, a U.K. court ruled in Ambrosiadou’s favor in one of the cases, saying it was her firm, and not Coward, that owns the software that runs Ikos’s trading platform. Other lawsuits and their divorce are still pending.

Both Coward and Ambrosiadou declined to comment on the legal cases.

As for the name of his new fund, Coward said he was “looking for something that was the opposite” of the “grand names” that hedge funds often take. That was also why he decided to start the firm’s name start with a lower-case “d.”

“It’s also kind of our strategy -- nibbling away at the corners, the cracks in the markets, rather than trading the big moves,” he said.

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