Multi Billion Hedge Funder Explains How He Returned Over 20p In One Of The Worst Years For Hedge Fund Industry

2014 was arguably one of the worst years for hedge fund industry, if not the worst. However, Capital Fund Management (CFM), one of the largest French hedge fund with assets under management of $6 billion (as of 2012) and offices in New York and Tokyo managed to return 23p for the year.

Philippe Jordan, president of Capital Fund Management, was on Bloomberg Monday to talk about how his fund managed to perform so spectacularly in a year that saw many hedge funds closing shop.

How Did You Managed To Return 23p in 2014?

“Oh, I think we did it, it’s a combination of a quarter of a century’s work. So, it wasn’t instantaneous, a lot of work,” Jordan said.

What Did You Do Specifically?

“We had a good year across all of our P&Ls and all P&Ls are composed in our hedge fund business of one part what we call directional trading and that’s directional trading on futures contracts and it’s not just long-term trend following,” Jordan replied. “It’s systematic macro trading, it’s doing [carry on currencies], it’s doing a number of strategies that are not linked to long-term trend following, it’s equity statistical arbitrage, equity market neutral. Quants on a global portfolio of 4,000 stocks worldwide.”

How Are You Different From Cliff Asness’ AQR Capital Management?

“I don’t know what Cliff has in his [black] box, but I do know what we have in ours,” Jordan said. “Well, the way we think of the world and the way we try and tackle the problem is we don’t want to be in the prediction business, we want to be in the risk business.”

“ So, we start by figuring out how much risk we want to take and how to quantify and how to realize it, then we figure out what types of returns are rational in-line with that risk expectation that we can generate and how many of these returns can we find that have low co-relations to one another.”