The Winton futures fund is managed by commodity trading adviser Winton Capital Management and aims for growth irrespective of market conditions and price rises in asset classes.
The fund uses Winton’s statistical analysis and trading software to track the daily prices of futures, options and forward contracts relating to stock market indices, bonds, short-term interest rates, currencies, metals, livestock, grains, energy and agricultural products. It may also trade in over the counter derivatives, which are contracts that are negotiated and traded directly between traders, rather than through an exchange or clearing house. The foreign exchange market is an example of this.
Winton’s trading software provides instructions on which short-term trades to make within long-term market trends to produce the highest returns within set risk parameters. If futures prices are expected to rise, a long position will be established and a short position will be taken if prices are expected to fall.
Winton believes the quality of its statistical research gives it the edge over other trading systems, so that it should suffer smaller losses and take better advantage of market trends. Its trading system looks at the probability of future price movements in relation to past price movements. This provides traders with the knowledge they need to buy and sell on the futures markets at the right times.
Trading systems that follow long-term trends can be unprofitable for long periods in particular markets or sectors, so investors cannot expect instant returns. Heavy losses may also result if the relationship between the market and historical prices breaks down and liquidity dries up, which happened to many computer-based portfolios during the credit crunch.
However, Winton’s managers can intervene in the investment process to reduce risk in these circumstances.