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This Hedge Fund Topped Rivals With Mix of Algorithms and 16th-Century Theory

  • First Quadrant-run fund jumps 9.6% in past year, beating peers
  • Firm model is inspired by concept of purchasing power parity
A trader points to a graph on his computer screen.
Photographer: Christophe Archambault/AFP via Getty Images
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The market turbulence leading investors to flee hedge funds around the world is providing a measure of vindication for one asset manager.

First Quadrant LP, which manages $11 billion in foreign-exchange strategies, relies on computer models that crunch data such as interest-rate differentials and equity valuations to identify currencies’ fair value and determine entry and exit points. The $1 billion Absolute Return Currency Fund it runs out of Pasadena, California, for John Hancock Investments has returned 9.6 percent in the past year, topping 13 rivals tracked by Bloomberg.