Winton Capital Management

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Winton Capital Management
Type Private
Industry Investment management
Founded October 1997 (1997-10)
Headquarters London, England
Key people David Harding
AUM $25 billion as of March 2014[1]
Employees 280[2]
Website www.wintoncapital.com

Winton Capital Management (or Winton) is a British investment management firm founded by David Harding. It is a quantitative investment manager whose trading decisions are guided by models developed from scientific research and mathematical analysis. In the United States, Winton is registered with the Securities and Exchange Commission as an investment advisor and with the Commodity Futures Trading Commission as a CTA, and is authorised by the Financial Conduct Authority in the UK. The company trades on more than 100 global futures markets in a wide variety of asset classes and on global equity markets. The firm was launched with $1.6 million in 1997 and as of March 2014 it held $25 billion in assets under management.[1]

History[edit]

Founding[edit]

In 1996, physicist and investment manager David Harding left Man AHL (formerly Adam, Harding and Lueck), a systematic managed futures fund and created Winton Capital Management.[3][4] Using Harding's middle name,[5] the firm began trading in October 1997 with the company's flagship fund, Winton Futures Fund.[6] When conceptualizing the firm, Harding drew inspiration from Renaissance Technologies, a Long Island, New York hedge fund management company. Winton employs statisticians, engineers and physicists, to pursue investment strategies based on scientific research and analysis.[7]

According to Harding, Winton had difficulty attracting clients as a commodity trading advisor (CTA), because investors preferred hedge fund strategies that focused on the equity market rather than futures contracts.[5] However, using fees that were lower than industry standards, the firm was able to secure investors.[5][8]

Early years[edit]

In October 1997, Winton's first futures fund was launched with approximately $1.6 million in assets. The fund lost nearly 13% of its value in the first month but ended the year up 3.49%. In the following three years Winton returned gains of: 52.18% in 1998, 15.07% in 1999 and 10.44% in 2000. By November 1999, the firm had raised $100 million in capital from investors.[3] That same year, Winton sought investors in the Japanese markets.[9] The positive returns continued until late 2001, when there was a four-month period of drawdowns following the September 11 attacks.[3]

From the company's inception through the mid-2000s, its annual rate of return was approximately 19%.[10] The number of employees and the firm's assets under management grew significantly in 2004, reaching $1 billion.[3]

Expansion[edit]

In September 2005, the firm launched the Winton Evolution Fund, which was designed as a mixed arbitrage and multi-strategy fund investing in a variety of financial instruments and securities.[3] The launch of this fund was part of the firm's transition, away from the futures market, and towards a more diversified strategy.[3][7] In July 2007, Petershill Fund, a private equity fund set up by Goldman Sachs Asset Management International, acquired a 9.99% stake in Winton.[10][11] According to the firm, it believed the acquisition would further increase market confidence in its operations.[10]

By 2007, Winton was managing $10 billion in total assets,[11] and was ranked as the third largest CTA by the industry journal Absolute Return.[3] The following year, Winton Capital Management was named Real Business's "most profitable" company of 2008, having achieved margins of 65%,[12] and was ranked the third largest private finance company in Britain by The Daily Telegraph.[13] In October of 2009, the company announced that a passive 10% stake in the firm was acquired by Goldman Sachs [14]

The firm continued to expand and "become more of a general investment firm".[7] In late 2008, the company opened a Hong Kong office, its first office outside of the UK.[9] During the economic downturn in 2008 and 2009 the firm's Diversified Trading Program held up relatively well with a loss of -5.38% in 2009 after a 20.25% return the previous year.[15][16][17] The company launched the Winton Global Equity Fund in 2010 and it received UCITS approval in Europe. The fund was designed to be a long-only, portfolio using quantitative analysis.[18] The Winton Futures Fund returned an approximate annualised rate of 17% net from its inception in 1997 through 2010.[18]

Through the end of 2012, Winton Capital Management had a positive return on its investments every year, except 2009 and 2012.[19][2] While Winton's individual funds are established in offshore locations, the investment advisor fees are repatriated to the United Kingdom where they are taxed.[2][20] In 2013, media coverage of the firm's founder reported that since 2006, Winton has paid nearly £521 million in British taxes, including £133 million in 2011.[21]

In September 2012, Winton became research consultants with Fortune SG Fund Management of Shanghai to help develop China's first managed futures fund.[22][23]

Organization[edit]

Operations[edit]

David Harding is the company's founder, executive chairman and chief executive officer.[1] Matthew Beddall is the chief investment officer (CIO)[19] and Raj Patel is the Chief Operating Officer (COO).[24] Approximately 70% of the firm's employees own shares or share options in the company.[10] Winton employs approximately 280 staff members.[2]

More than 100 of the firm's employees are academics doing mathematical research [10] and studying statistical relationships and trading patterns.[8] These highly trained specialists are organized into research teams, which peer review and test new strategies, gather data and identify trends.[6] While quant hedge funds broadly have struggled for several years just following the 2008 financial crisis, Winton remains a top recruit of quantitative minds. [25]

Winton's offices are based in the UK with offices in Oxford and West London.[3][10][26] The majority of the firm's clients reside outside the UK and many are from the United States.[3][4]

Investment strategy[edit]

Since its inception, Winton Capital Management has traded as a commodity trading advisor (CTA). It is regulated by the Commodity Futures Trading Commission as a CTA[5] and by the Financial Conduct Authority in the UK. Winton is also registered with the U.S. Securities and Exchange Commission as an investment advisor.[27]

The firm refers to itself as a "modern investment management company" [28] and employs managed futures strategies using data analysis and modelling to follow trends in global futures markets such as commodities and bonds.[29] After establishing the Winton Evolution Fund and Winton Global Equity Strategy, the firm began offering multi-strategy and equity investment programs that invest in equity markets around the world.[3][26][30]

Winton uses research and quantitative data analysis to identify favourable trends in the market[31][26] and its focus on research differentiates it from its industry companions.[3][31] The firm uses scientific research to collect data [26] and identify patterns and develop statistical tools, which are applied to its investments.[32] Winton relies on continuous research to ensure its trading models have the highest potential for positive returns.[33] Its trading models are informed by relationships identified through applied research of market data;[26] such as volatility estimations derived from a study of the 1988 corn bull market.[33] In recent years, Winton has further developed its statistical research, focusing on big data; according to the Financial Times, in 2013 its machines processed "the equivalent of 30m King James bibles' worth of information every day".[2] In April 2013, Winton was featured in the BBC2 program Horizon: The Age of Big Data for its use of scientific analysis of data, particularly for its capture and processing of large data sets including historical data for the markets that it trades in and newly produced data from thousands of companies.[34]

Winton's futures trading is highly automated and systematic and uses computer algorithms[5] to trade futures in financial assets including equities, currencies, bonds, commodities, livestock and energy [9] in over 100 futures markets worldwide.[3] Winton uses a mix of long-term and short-term trading as part of its strategy[3] and combines uncorrelated strategies to maximize their risk-return ratio.[3][26][29] According to the firm, it uses the same mathematical tools, for research, statistical data analysis, stock selection, and futures investments.[35] From around 2008, the Winton Futures Fund has increased its allocation to cash equities.[36][37]

Funds[edit]

Winton's Diversified Program, comprising its managed accounts and Winton Futures Fund, uses different models to trade in more than 100 futures markets.[19] Winton Futures Fund is Winton's flagship and its longest running fund; a managed futures fund[38] traded on the Irish Stock Exchange.[8] The fund is trend following, focusing on longer-term trends, and as of April 2011, has returned an annualised rate of almost 17%.[19] The second fund launched by Winton was its Winton Evolution Fund, which began trading in September 2005. It is a multi-strategy fund with no restrictions on its investment mandate.[5][39] The Winton Global Equity Fund, designed to employ Winton's mathematical analytical methods to invest in one class of asset, was given UCITS regulatory approval in Europe in 2010.[35][18]

Assets under management[edit]

When Winton Capital launched in October 1997, it held $1.6 million in assets.[3] Over the next 3 years the assets held by the firm grew to over $150 million at the end of 2000.[40] By 2004, the firm's seventh year in operation, its assets under management reached $1 billion.[41] In the mid-to-late 2000s, the firm experienced large inflows of capital, leading to its assets under management increasing rapidly from $4.8 billion in mid-2006,[4][10][42] to $12.4 billion in 2009.[29][43] Between 2010 and 2012, Winton's total assets under management increased by almost $15 billion, from $13.7 billion in June 2010 to $28.5 billion in February 2012.[35] As of March 2014, Winton's assets under management totaled $25 billion.[1]

References[edit]

  1. ^ a b c d Ben Wright (2 March 2014). "Winton Capital Plans Expansion Drive With Up To 100 New Hires By Year-End". The Wall Street Journal. Retrieved 7 April 2014. 
  2. ^ a b c d e Sam Jones (20 February 2013). "Winton Capital have curious minds to supply science to finance". Financial Times. Retrieved 29 April 2013. 
  3. ^ a b c d e f g h i j k l m n o Barry Cohen (November 2007). "Winton's Winning Formula". Absolute Return. 
  4. ^ a b c Bill McIntosh (22 January 2007). "Winton Capital, Dexion Team Up for Fund IPO". HedgeWorld Daily News. 
  5. ^ a b c d e f "Profile: Winton wonderland". FOW Magazine. October 2006. 
  6. ^ a b Loch Adamson (May 2009). "New World Masters". Alpha Magazine. 
  7. ^ a b c Leah McGrath Goodman (April 2008). "The Wizard of Winton". Trader Monthly. p. 106. 
  8. ^ a b c Jack Willoughby (29 June 2009). "Trend Tracker". Barron's Hedge Funds. 
  9. ^ a b c Tomoko Yamazaki; Komaki Ito (12 July 2009). "Winton to Start Japan Fund, Hire H.K. Staff in Asian Expansion". Bloomberg. Retrieved 14 September 2011. 
  10. ^ a b c d e f g Bill McIntosh (8 October 2007). "GSAM Fund Buys Stake in Winton". Reuters Hedgeworld. Retrieved 6 May 2013. 
  11. ^ a b "Goldman fund buys 10 percent stake in Winton: report". Reuters. 8 October 2007. Retrieved 14 September 2011. 
  12. ^ "Hot 100; Most profitable: Winton Capital". Real Business. April 2008. 
  13. ^ Katherine Griffiths (19 August 2008). "Finance at its very highest; Britain's biggest private companies". The Daily Telegraph (London). p. 7. 
  14. ^ "Goldman Said to Buy Stake in Winton Capital". The New York Times. 9 October 2007. 
  15. ^ "Winton Capital Management Ltd". managedfutures.com. Altegris. March 2013. Retrieved 30 April 2013. 
  16. ^ William Hutchings (31 May 2011). "Interest grows in a Winton Capital IPO". eFinancialNews. Retrieved 21 September 2011. 
  17. ^ Beverly Chandler (29 April 2009). "Maintaining the flow". Investment and Pension Europe. 
  18. ^ a b c Loch Adamson (December 2010). "Quant Shop Winton Capital Finds Its Long-Only Game With New Fund". Institutional Investor. 
  19. ^ a b c d Kris Devasabai (April 2011). "Managed futures on the rise as investors chase diversification". Hedge Funds Review. 
  20. ^ "Winton Evolution Fund: Winton Capital management". risk.net. Risk.net. Retrieved 7 May 2013. 
  21. ^ Nicholas Hellen (30 September 2013). "Rich man pays his taxes — shock". The Sunday Times. Retrieved 29 April 2013. 
  22. ^ Kris Devasabai (26 April 2013). "CTAs eye swap futures". Risk.net. Retrieved 29 April 2013. 
  23. ^ Harriet Agnew (25 September 2012). "Winton backs China's first managed futures fund". Financial News. Retrieved 30 April 2013. 
  24. ^ "Company Overview of Winton Capital Management Limited". investing.businessweek.com. Bloomberg Businessweek. Retrieved 30 April 2013. 
  25. ^ http://news.efinancialcareers.com/uk-en/157398/quant-hedge-funds-struggle-to-hold-on-to-mathematical-whizz-kids/
  26. ^ a b c d e f Martin Steward (1 December 2010). "Winton's global equity strategy". Investment and Pension Europe. 
  27. ^ "Investment Advisor Search Results". adviserinfo.sec.gov. Securities and Exchange Commission. Retrieved 29 April 2013. 
  28. ^ David Harding (Spring 2008). "What’s in a name? Where are CTAs going?". Global Review - Hedge Fund Intelligence. 
  29. ^ a b c "Harding's Hedge Fund Thrives on Surprise". Reuters Hedgeworld. 16 October 2009. 
  30. ^ Stephen Taub (4 March 2014). "The Morning Brief: David Harding's Winton Capital Plots Big Expansion". Alpha Magazine. Retrieved 7 April 2014. 
  31. ^ a b "It's rocket science: MacBoffins crunch the numbers". The Australian. 13 October 2005. p. 29. 
  32. ^ "A Head for Numbers". Hedge Fund Review. August 2009. 
  33. ^ a b Bill McIntosh (April 2010). "CTAs Focus On R&D Awaiting Trend Breakout". The Hedgefund Journal. 
  34. ^ "Big Data in the 21st Century..The New Digital Battlefield...". Business Information Portal. 11 April 2013. Retrieved 29 April 2013. 
  35. ^ a b c Jez Liberty (20 March 2012). "Trend Following Wizards update February 2012;". 
  36. ^ Anita Raghavan (7 October 2013). "A Recent Flourish for Winton Capital". The New York Times. Retrieved 7 April 2014. 
  37. ^ "Winton Capital Management – Best Managed Futures/CTA". Hedgeweek. 26 March 2013. Retrieved 7 April 2014. 
  38. ^ Vivek Ahuja (23 August 2011). "Sorrell, Man Group and the systematic connection". E-Financial News. Retrieved 14 September 2011. 
  39. ^ Philip Coggan (9 November 2010). Guide to Hedge Funds: What They Are, What They Do, Their Risks, Their Advantages. John Wiley and Sons. p. 53. ISBN 978-0-470-92655-0. Retrieved 5 August 2011. 
  40. ^ "Fast finish makes 2000 a winner". Managed Account Reports. January 2001. p. 1. 
  41. ^ "Winton passes $1b mark on seventh anniversary". Managed Account Reports. October 2004. p. 1. 
  42. ^ Neil Behrmann (11 May 2006). "Managed futures funds and CTAs gain but beaten by commodity indices". Infovest21 News. 
  43. ^ Taub, Stephen (Apr 2009). "The Hedge Fund 100: Our Rankings of the World's Biggest Single Manager Firms". Alpha Magazine. 

External links[edit]