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October 23, 2012 at 08:00 PM
Most of the time, investors are glad to see new money coming into a manager they’ve chosen because they’re pleased to have their choices confirmed by others. It’s even better if you know that the new money is smart money. That’s why I smiled this summer when I read that the Church of England and my company, Altegris, share the same pew, so to speak. Both of us have money with David Harding of Winton Capital Management. The Church of England picked Winton and two other hedge fund managers (Bridgewater and Blackstone) in 2011 to manage some of its $1.7 billion pension fund, doubling its allocation to hedge funds in the process.
By necessity, it also confirms that your manager selection process works when others follow in your footsteps and recognize the same talent. Still, it would be an interesting exercise to see how the Church of England selected Winton. Its superb track record as a commodity trading advisor (managed futures manager) is no secret, but its proprietary mathematical algorithms and advanced statistical analysis of historical market data are most definitely confidential. In other words, at the final stages of its manager selection process, the Church of England had to make a leap of faith.
Altegris began investing with Winton in the late 1990s. I remember how we selected the firm. We looked at Winton (which is David Harding’s middle name) from every conceivable angle—starting with having followed Harding’s career since 1997, when the Cambridge-educated theoretical physicist left the Man Group (where I began my career) to form his own commodities futures trading firm with $1.6 million in assets.
We watched Winton grow into a $29 billion AUM firm with more than 100 researchers whose areas of expertise range from operations research to statistics, climatology, actuarial science, extragalactic astrophysics and financial mathematics. We studied Winton’s computer models and its strategy of holding long and short positions in over 100 futures markets around the world. As with nearly all our managers, we insisted that Winton accord us full transparency so that we could monitor its trading activity and performance on a real-time basis. Even with transparency, however, the final decision came down to a combination of art and science because, in the end, you are judging a person’s character and abilities. If they were being frank, I think every other Winton investor would say the same thing.
