Credit Suisse Group AG is starting two hedge funds focused on quantitative strategies as part of a broader effort to build the bank’s asset management unit, according to a person with knowledge of the matter.
The two funds, Qube and QT, are comprised of existing London and New York-based teams from Credit Suisse’s Systematic Market-Making Group that had been housed within the investment bank, said the person, who asked not to be named because the matter is private.
Karina Byrne, a Credit Suisse spokeswoman, declined to comment. Business Insider reported the news earlier Tuesday.
The business functioned as a proprietary arbitrage trading unit -- making bets with the bank’s own money -- until it was restructured after the financial crisis to comply with the Volcker rule, which bars that type of trading. By moving SMG to the asset management arm, its teams can raise money from outside investors and further pursue their strategy without being limited by regulations affecting the Zurich-based bank. SMG is one of eight businesses that have been moved to Credit Suisse Asset Management.
Qube, which is based in London, has already started trading with about $400 million in assets -- an amount that’s set to double by next month and then rise to $1.2 billion in the first quarter due to growing business in Asia, said the person. That fund will be led by Pierre-Yves Morlat, who joined Credit Suisse as head of proprietary arbitrage trading for Europe and Asia in 2009.
QT is expected to start trading in the first three months of next year with about $600 million under management. It will be based in New York and led by Nick Branca, who helped run SMG with Morlat, the person said.
Quantitative hedge funds as a group have outperformed traditional managers for years. Quants have gained an average of 5.7 percent annually in the past five years, as measured by Hedge Fund Research Inc.’s quantitative directional index. That compares with 4.4 percent for the average hedge fund.
(Updates with returns for quant hedge funds in seventh paragraph.)
--With assistance from Katherine Burton and Dakin Campbell To contact the reporter on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net. To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alan Mirabella, Josh Friedman
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