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Winton Capital Management – Best Managed Futures/CTA

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In 1997, David Harding and two employees established Winton with approximately USD2million. Today, that figure stands at an incredible USD25.75billion. Before Winton, Harding was the H in AHL. Once AHL had been assumed into Man Group by 1994, Harding started Man Research before leaving in 1996. Winton Capital is now Europe’s largest CTA manager and the world’s fifth largest hedge fund firm.

The firm’s flagship fund is the Winton Futures Fund. The portfolio is split roughly 20 per cent in equities, 20 per cent in fixed income, 20 per cent in currencies, with the remainder in commodities and interest rates (7 per cent). It has a Sharpe ratio of 0.80.

“We have approximately USD10billion in the fund, whilst managed accounts total around USD15.3billion,” says Robin Eggar (pictured), Head of Communications and Public Affairs, confirming that WFF attracted USD200million in net inflows for 2012.

Last year was a challenge for all CTA funds, and Winton was no exception, ending the year down a modest 3.5 per cent. That aside, WFF has generated positive returns in 13 of its 15 years and annualised returns of 15.76 per cent.

Part of the reason for Winton’s continued success over the years is the fact that it offers an attractive 1:20 fee structure: most CTAs charge a 2 per cent management fee. Another key reason was the hiring of Anthony Daniell as Director of Sales and Marketing (he became CEO in 2010 and has become Chairman as of 1 January 2013).

Daniell helped develop a sales team that has marketed Winton effectively to institutional investors and pension funds all around the world over the past 10 years. The US is now Winton’s biggest market at about 40 per cent.

Within Winton Capital, situated in a South Kensington Mews, the firm’s philosophy mirrors Harding’s academic background; he studied theoretical physics at Cambridge University. Winton’s approach is to apply rigorous quantitative models in a scientific-based approach to trading the markets.

Twice a year, Harding makes a point of handing out a prize for the research he likes the most. This illustrates clearly the collegiate environment in which Winton’s staff work and strive to find new trading ideas.

“We have 280 employees, of whom almost 120 are actively engaged in research. While all quant funds have researchers, it is our USP. We employ mathematicians, astrophysicists, engineers almost all of whom have post graduate degrees.

“We prefer investors to be investing in – rather than just the CTA industry or trend following – the idea of scientific research applied to financial markets,” explains Eggar.

Over the past five years Winton has been heavily researching equity markets and the WFF now trades individual cash equities in addition to the more traditional CTA fare of stock indexes.

Winton actually takes quite a considered approach to exploiting market inefficiencies. It doesn’t change positions in the fund too often, preferring to wait for meaningful long-term trends to emerge. That explains why GBP30million a year is spent on research. Over the long-term, Winton believes it has a “52 to 53 per cent edge” over the market but is striving to improve that.

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