Informed Portfolio Management is to close after a run of poor returns and as investors have yanked money from the computer-driven hedge fund.
Stockholm-based IPM, one of Europe’s oldest computer-driven hedge fund managers, said on Thursday that it would cease all investment activities and return investor cash.
Lars Ericsson, chair of IPM’s board, pointed to “the challenging combination of the strategy being out of favour, weak performance and substantial investment outflows” as reasons for the decision.
On Tuesday the Financial Times revealed that the firm had suffered a dramatic drop in assets, from $8bn a decade ago to around $1bn, with much of the decline coming in the last couple of years.
Computer-driven hedge funds attracted tens of billions of dollars in assets from investors during a surge in interest around five years ago, as firms looked to technological developments such as machine learning and big data to gain an edge on human traders.
But the performance of some funds has lagged behind in recent years. Many have found their models, which are based on analysing market and economic conditions over previous decades, could not predict what would happen during a pandemic. Lockdowns, which brought most economic activity to a halt, and central bank and government stimulus, which drove a sharp recovery in risky markets, increased unpredictability.
IPM’s systems analyse economic fundamentals and are based on a belief that market prices fluctuate around an asset’s intrinsic value.
IPM, which was set up in 1998 and is owned by finance group Catella, lost about 3.4 per cent in its main Systematic Macro fund last year and a further 12.5 per cent so far this year, according to numbers sent to investors.
IPM had raised billions of dollars from investors in the US, Europe and Asia, helped by a gain of about 15 per cent in 2014 and further gains the following two years.
In 2019 it shut its Systematic Equity fund, which struggled because of bets on so-called “value” stocks, companies that are thought to be trading below their intrinsic value, which had underperformed. At the time the Systematic Macro fund was about $6bn in assets, but it has fallen below $1bn this year.
Catella initially bought a stake in IPM in 2011 and increased it the following year, taking control of the firm in 2014. Catella did not immediately respond to a request for comment.