The Canada Pension Plan Investment Board has invested money with hedge fund firm Engineers Gate, its latest bet on so-called “quant” managers whose market bets are guided by elaborate computer algorithms, according to a recent disclosure.
CPPIB, which invests more than US$200 billion (about $269 billion at June 30) on behalf of current and future Canadian retirees, is one of the largest pools of pension capital in the world.
Quants are increasingly popular with investors because they are seen as having a better chance of performing well when other, more common strategies are faltering.
New York-based Engineers Gate was formed in early 2014 by Glenn Dubin, who co-founded Highbridge Capital Management, a hedge fund and private equity manager that was sold to JPMorgan Chase & Co. Dubin holds a majority stake in Engineers Gate and is chairman, according to filings with U.S. regulators.
The firm’s investments are run by a team of portfolio managers, including veterans of quantitative trading strategies at SAC Capital Advisors, the former hedge fund firm owned by top investor Steven Cohen and Citadel Llc, founded by Ken Griffin, another successful investor, They have doctorates in subjects such as mathematics and computer science, as opposed to MBAs, a traditional Wall Street degree, according to public biographies.
Engineers Gate comes from the name of one of the entrances to New York City’s Central Park.
Quant strategies have posted relatively strong performance this year, a difficult one for other hedge funds. The HFRI Equity Hedge Quantitative Directional Index gained 0.13 percent over 2015 through September, beating a loss of 1.35 percent by a composite index of all hedge fund strategies measured by HFR, a performance tracker.
Part of the CPPIB’s assets, about US$910 million, go to external hedge funds, including a stable of managers with a quantitative bent.
The funds include vehicles managed by Capital Fund Management, OxFORD Asset Management, Two Sigma Investments, Amplitude Capital and AQR Capital Management, according to public disclosures.
CPPIB’s approximately 60 external fund managers also include other large firms such as Bridgewater Associates, Elliott Management and Pershing Square Capital Management.
CPPIB also has a quantitatively driven internal unit that makes short-term market bets, called Short Horizon Alpha. Alpha is a measure of investment returns above a market index, and is meant to represent the value added by the manager.
The size of the CPPIB investment in Engineers Gate wasn’t clear. As of June, Engineers Gate had invested a total of US$645.7 million, including borrowed funds, according to public filings.
Tudor Investment Corp founder Paul Tudor Jones is a minority owner in Engineers Gate, holding an equity stake of at least 10 percent, according to disclosures.
Spokesmen for CPPIB and Engineers Gate declined to comment.
By Lawrence Delevingne
(Editing by Jeffrey Benkoe)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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