NEW YORK: Former Macquarie Group Ltd quantitative hedge fund chief Nick Bird is having a second go at running a Europe-focused vehicle.
His OQ Funds Management began to test computer models for the new fund in September and plans to open it to external clients in the fourth quarter of this year, depending on the progress of research and development, Hong Kong-based Bird said in an interview.
The strategy will be able to accommodate as much as US$600mil of capital initially.
Bird’s renewed interest in opening a European fund comes as OQ’s assets topped US$1bil in 2025, five years after he founded the firm. Both its Asia and Japan funds have reached the maximum capital that they can comfortably accommodate for now, according to Bird.
The straight-talking Australian once ran a rare multibillion-dollar Asia-based quant hedge fund business at Macquarie.
Starting with a vehicle focused on the home region in 2005, it eventually added European and Americas funds, with assets totalling US$2.8bil at the peak.
In a March 2024 interview, Bird cited the expansion outside Asia and taking in too much money as contributing to the business’ demise in 2018.
It coincided with a period when easy money fuelled investor frenzy for high-growth equities, frustrating quant hedge funds that count value stocks as a key component of their investments.
Bird quietly started OQ in 2020, a year after leaving Macquarie. He hunkered down without an external investor for the first two years and vowed to control asset growth at a more conservative pace.
His flagship Asia fund had generated an annualised return of more than 12.4% by January, beating the MSCI Asia-Pacific Index despite being less volatile.
Its market-neutral approach involving balanced bullish and bearish wagers tends to cap gains in bull runs while offering clients protection against losses during selloffs.
The fund rose more than 14% annually in 2021 and 2022, when the benchmark was dragged down by the Covid pandemic, Chinese regulatory crackdowns and geopolitical tensions.
Quant funds are growing in popularity.
The strategy, seen as uncorrelated with equity markets, is now the most sought-after among hedge fund investors for the first time since Goldman Sachs Group Inc began to compile such data, the Wall Street bank said in a January report.
Bird’s niche has been combining computer models that are used to screen stocks with human judgment to select and assign weightings to factors and individual stocks.
For OQ’s Asia fund, about 50% of the profits can currently be attributed to human – or discretionary – decisions.
Bird said he hopes to bring this down to about 30% by mid-2026 as the firm refines its models to increase automation.
The Asia fund has required a higher level of human discretion because of the region’s mix of developed and emerging markets and multitude of currencies, as well as other quirks.
These include stamp duties, dual listings of Chinese stocks, corporate governance reforms in Japan and South Korea, and difficulties in shorting stocks in various markets.
A common currency and fewer market idiosyncrasies will allow the European fund to be more automated, with fewer than 10% of trades requiring human intervention, Bird said.
Backtesting of its computer models also showed stronger results for the European fund than its Asia vehicle, suggesting less need for discretionary overrides, he added. — Bloomberg
