| LONDON, Sept 3
LONDON, Sept 3 Hedge fund manager Man Group
has launched a computer-driven fund that will try to
make money trading government bonds despite the ultra-low yields
on offer, the latest step by the struggling firm to try and
revive its fortunes.
The Nomura Man Systematic Fixed Income fund, which launched
in July with $50 million of external investor money, uses
algorithms from Man's $16.7 billion flagship fund AHL to help it
trade interest rate and bond futures, currencies and interest
rate swaps around the world.
The fund will seek to latch onto trends in prices; spot
distortions in yield curves and benefit by their reverting to
normal; and profit from higher interest rates in emerging market
currencies if it judges market conditions favourable.
The launch comes as hedge funds and other investors struggle
to get to grips with ultra-low sovereign bond yields and work
out whether prices are over-inflated amidst the euro zone debt
crisis. On Monday the German two-year yield was minus 0.004
Man says the new fund, which can bet on both rising and
falling prices, will target double-digit returns.
"Yields are also at extremely low levels. If you're (only)
long bonds, you certainly know what your upside is," Sandy
Rattray, chief investment officer of Man's Systematic Strategies
(MSS) unit, which runs $2.2 billion, said in an interview.
Last month AHL said it had built a new computer model to cap
its exposure to bond futures for fear of big losses, should the
market reverse abruptly.
Rattray, who co-developed the VIX volatility index,
also known as the "fear index" which is widely used to measure
investors' perception of risk, added that it will benefit from
the reduced competition from rival traders such as banks, which
have been cutting their proprietary trading units.
"This is an extremely clear example of where banks have
reduced risk and funds ought to be stepping in to take risk.
VARs (values at risk) from investment banks have come down in
fixed income," he said.
Reuters reported in April that Man was planning to launch
The launch comes as Man, whose share price has dropped by
three-quarters since the start of last year on the back of
client outflows and poor fund performance, tries to regain
investor confidence and improve returns.
In June Man Group dropped its finance director, while in
July it announced $100 million of cost cuts, its third wave of
savings since a widely criticised purchase of rival GLG in 2010.
Earlier this year Man announced the launch of the Man
Commodities fund, also run by MSS, which uses algorithms to
trade 25 commodity futures contracts and also allows human
Rattray said on Monday the Commodities fund, which launched
with $50 million in March, had raised "a few million". He said:
"The commodity fund has been slightly more slow going - probably
because of the timing."
However, the firm's Tail Protect fund, which aims to profit
during periods of market turmoil, has raised $700 million and
has more than $300 million in investor commitments, Rattray