Man Group's Ellis sees computers trumping humans again in 2015

[November 19, 2014]  By Simon Jessop and Nishant Kumar

LONDON (Reuters) - Computers stole a march on their human trading rivals this year and should continue to do so in 2015 as a much-heralded return to sustained volatility is unlikely to happen, an executive of Man Group, the world's biggest listed hedge fund, said.

Speaking at the Reuters Global Investment Outlook Summit on Wednesday, Man President Luke Ellis said while many in the market thought an end to U.S. monetary easing would see asset prices jump around more, potentially rewarding flesh-and-blood traders, other bankers were stepping into the breach.

Japan and China are both easing policy and the U.S. Federal Reserve has yet to start taking money out of the system so, with the European Central Bank also likely to loosen policy further, markets could expect more of the same in the coming months.

"The basic dynamics of the market are with us for a while. It's not cool to go to a cocktail and say the answer is 'own bonds and lots of bonds, and be long the dollar and continue to own the Nikkei and be short the yen," Ellis said.

"Everybody likes to turn up to a cocktail party and call turning points, but I don't think we're seeing one ... We may have a change in printing press, but it's the same environment, and the great thing about computers is they don't go to cocktail parties," he said.

Commodity trading advisers or CTA, a quantitative hedge fund strategy betting on long-running trends in markets, are by far the best-performing strategy this year.

Long-term CTAs returned 9.4 percent through Nov. 4 this year, data from Lyxor Asset Management showed, with successful bets including being short the euro and yen, and short energy and precious metals.

The 19-commodity Thomson Reuters/Core Commodity CRB Index has fallen 5 percent this year and slid 10 percent in the September quarter, its biggest quarterly drop in three years.

The 2014 gains for CTAs mark a turnaround for the strategy which had lost money in 2013 and generated low single-digit returns in the previous two years.

Nearly 40 percent of Man Group's $72.3 billion in assets at the end of September were held in quantitative strategies, which typically follow a set of mathematical techniques to evaluate risk, pricing and timing in financial markets.

Man's quantitative funds took in a net $1.2 billion in new money during the September quarter, the company said in its most recent trading update.

A further $11 billion was held in fund-of-fund strategies, through its FRM unit, and the balance largely in human-led equity, credit, commodity and currency strategies through its GLG unit.

"This year, in the stock-picking strategies with computers, we've had a very good year ... (and) it's been a good year for CTAs. It's through doing stuff that isn't very exciting but returns is what you want," Ellis said.

"For me, that's where I think the best opportunities to make money are."

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(Additional reporting by Sam Wilkin; Editing by Susan Fenton)

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