The hedge fund robots are winning again.
That's a key lesson from 2014, when computer algorithm-led investing produced stellar returns, beating most gut-driven human managers and dramatically recovering most of their losses from 2011, 2012 and 2013.
So-called managed futures funds—which trade the futures contracts of stocks, bonds, currencies and commodities—gained an average of 15.2 percent last year, according to Societe Generale unit Newedge. That beat virtually every other hedge fund strategy, including stock pickers, beat-up bond vultures and macroeconomic prognosticators. The average hedge fund gained in the low-to-mid single digits for 2014, according to HedgeFund Intelligence.
The biggest gains came at funds that practiced a "trend following" strategy. Those managers—who use computer models to bet on price movements in either direction and often perform best when clear patterns emerge over several months—gained an average of 19 percent, according to Newedge.
Several of the largest funds in the industry, including those managed by $3.8 billion Cantab Capital Partners, $4.7 billion Aspect Capital and $13.4 billion Man AHL, gained more than 30 percent. Funds run by Two Sigma, Winton Capital, Campbell and others also gained double digits.
"We've seen significant moves in a number of markets, and trend followers have been able to take advantage of them," said James Skeggs, global head of the Newedge prime brokerage alternative investment advisory group.