Hedge Fund Starts a Quant Trading Desk in Brazil Comeback Bid

(Bloomberg) -- Marcelo Giufrida is drawing inspiration from Jim Simons’s Renaissance Technologies LLC as he works to lure investors back to his Brazilian firm’s flagship hedge fund.

Giufrida’s Garde Asset Management Ltda. put together a five-person team to start a quantitative-trading desk, partially inspired by Renaissance and other global hedge funds that have been successful with the approach, he said in an interview. The launch is part of a comeback bid for the fund, the Garde D’Artagnan Master, which lost half its assets in little over a year.

“We’re starting to see some of the biggest global quantitative funds having a stronger presence in Brazilian markets, which means there are new, competitive players with a different approach making life more difficult for the traditional ones,” said Giufrida, Garde’s chief executive officer. “So we decided it was time for a more ambitious project.”

The strategy will initially account for about 7% of total risk at the firm’s 4.3 billion-real ($1 billion) flagship fund, Chief Investment Officer Carlos Calabresi said. “Global markets are much more advanced than Brazil on this front, but the gap will close and we want to be ahead of it,” he said.

Renaissance Technologies, founded by military code breaker James Simons, is one of the oldest hedge funds with a quantitative strategy. The secretive firm is known for its Medallion Fund, which generated average annual returns of close to 70% before fees since 1988 without ever suffering a yearly loss.

Christian Spanger, who’s been at Garde since 2015, will head the effort along with Mauricio Carneiro, who was hired from QuantumBlack, a data-science firm owned by McKinsey & Co. Spanger had already been using some algorithms as a trader for Brazilian rates and now, with Carneiro’s arrival, the duo is developing models for foreign exchange and equities. They said they prefer the term systematic trading, instead of quantitative.

Still Small

Quant strategies combine a wide array of approaches, from taking advantage of arbitrage opportunities in stock markets to surfing trends in currency prices, using powerful computers and complex algorithms to make automated trading decisions. There’s no official figure for the size of those strategies in Brazil, which account for a small fraction of the industry’s total 5.3 trillion reais in assets.

Garde’s foray into quantitative trading is among measures the firm took after a wave of withdrawals that began last year and hit its flagship fund. The redemptions stopped in recent months, Giufrida said, as the fund’s performance rebounded to 9.3% year to date. That’s almost twice the total return of its benchmark. Garde reopened the fund for new money and hopes the performance recovery, personnel changes and the new algorithm initiative will help entice investors.

“We’re optimistic we will reap the reward of the changes we’ve done,” he said.

To contact the reporters on this story: Felipe Marques in Sao Paulo at fmarques10@bloomberg.net;Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Dan Reichl

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