Funds Hub

Money managers under the microscope

Wace wades into HFT debate

November 25, 2009

High frequency trading strategies have been in the news for all sorts of reasons recently, attracting controversy over their effect on markets, whether some other investors may be disadvantaged, or for the level of fees piled up as the trades tick through in their thousands.

rtr26sy3However, Ian Wace, co-founder of Marshall Wace — one of Europe’s biggest hedge fund firms with assets estimated by EuroHedge at $6.5 billion at the end of last year — has leaped to the industry’s defence, citing performance from the firm’s own Eureka fund.

“We manage an active trading fund and I do accept there are frictional charges,” he said at yesterday’s Hermes Fund Managers and City of London responsible asset management conference. “If we have turnover of 15 to 20 times per annum and it costs 30 basis points to turn the assets that implies a 6 per cent charge per annum.

“People could say “how can you justify that?”. I reply that if you provide 14.59 per cent of absolute return after fees and the 6 per cent charge, then it could be justified.

“I go to huge lengths to find where the alpha is, and I don’t pay a penny more than I want to pay for transactions.”

And while hedge funds will always have their critics, Wace drew a contrast with broad stock market returns.

“When I look at returns, over the last 12 years equities are unchanged while we have provided 400 per cent compound returns because of the turnover in our funds. So who’s wrong?”

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