Biggest Hedge Fund Run by a Woman Emerges After Braga Spinoff (2023)

(Bloomberg) -- Leda Braga stood on a stage at Geneva’s InterContinental hotel this month and began singing “Happy.”

“Can’t nothing bring me down,” the hedge-fund manager known to some as Lady Braga shouted to about 80 employees, her voice hoarse as she sang the words to the Pharrell Williams anthem after a full day of meetings, she later recounted. “My level’s too high.”

Braga, a 48-year-old Brazilian with a doctorate in engineering, had good reason to be upbeat. Her main fund, the $8.4 billion BlueTrend, returned 9.5 percent in January, one of the biggest gains for hedge funds globally. It was her first month trading since breaking away from Michael Platt’s BlueCrest Capital Management after 14 years. Now she’s managing more money than any other hedge fund run solely by a woman.

Braga’s new firm, Systematica Investments, includes BlueTrend, which trades futures in more than 150 markets including equities, bonds, foreign exchange and commodities, and BlueMatrix, a $600 million fund that trades equities. Both rely on computer algorithms to make trades and were overseen by Braga when she worked for Platt.

“Systematic trading takes the emotion out of trading,” Braga, wearing a striped shirt, gray pencil skirt and a gold choker, said in an interview this month at her office in Geneva overlooking the Swiss Alps. “When a trader gets stop-lossed, he takes that home with him. A black box doesn’t care.”

Substantial Stake

Braga and Platt, 46, had considered the split “on and off” for some time, she said. They parted amicably, Braga said, with BlueCrest taking a “substantial” stake in her firm, according to a spokesman for both.

“Leda is a great friend of mine, and we are still equity holders in her business,” Platt said in an e-mail. “My appreciation and admiration for Leda is as high as it ever was. The spinout was to maximize opportunities and to provide Leda with a new challenge to lead her own business. It’s good for clients, us and Leda alike.”

The timing of the move was prompted in part by Braga’s worries about negative publicity surrounding an internal proprietary-trading fund at BlueCrest and downgrades of Platt’s firm by two hedge-fund advisers, Aksia LLC and Albourne Partners Ltd., according to three people familiar with the decision. Aksia deemed BlueCrest uninvestable and recommended clients redeem their assets because of a lack of transparency.

Platt declined to comment on the internal fund or the downgrades. BlueCrest Chief Financial Officer Andrew Dodd said last year the firm made “adequate” disclosures to investors.

“Institutions want auditability, they want transparency, and the systematic model provides that,” Braga said. “Investors care a lot about you sticking to a strategy.”

Besting Platt

Since Systematica began trading as its own firm, assets have grown to $9.2 billion from $8.5 billion. Investors allocated $240 million to the firm in January, Braga said. BlueTrend’s gain that month, its best since 2008, compares with a 6 percent drop for Platt’s main fund, BlueCrest Capital International, which trades on macroeconomic trends and suffered when the Swiss franc jumped after the central bank removed a cap limiting gains against the euro.

BlueTrend was down 2.4 percent in the first two weeks of February and is up 6.9 percent for the year through Feb. 13, according to an investor letter seen by Bloomberg News.

Such swings are typical of systematic funds, which can seem erratic to investors. Cantab Capital Partners’ main fund, for example, was down 6.8 percent at the end of July before coming back to end the year up more than 39 percent. It declined almost 28 percent in 2013.

‘Painful Year’

Braga said she’s planning to expand Systematica by creating new products, such as a fund that uses algorithms to trade over- the-counter derivatives, and offering a product that charges only management fees and nothing for performance.

To get bigger, Braga will have to convince investors skeptical of systematic funds after three lackluster years that hers is a winning strategy and prove she can manage a company, not just a fund. She’ll also have to prove herself in an industry where few women manage money, none on the scale of Braga. Jamie Zimmerman, founder of New York-based Litespeed Management, manages about $3 billion, and Judith Sciamma-Sabbah at WyeTree Asset Management in London oversees $536 million.

BlueTrend’s assets have slumped from a peak of $15.4 billion in April 2013, when investors began pulling money after two mostly flat years. The fund declined 11.5 percent in 2013. Algorithmic-trading firms struggled in those years as government intervention in the markets, such as quantitative easing, interfered with computer models.

“It was a very painful year for us,” Braga said of 2013. “I like to say that life goes in cycles. So after every storm comes the sun.”

BlueTrend ended 2014 up almost 13 percent.

Systematic Funds

“Systematic models, like every other investment model, don’t work all the time,” Ewan Kirk, chief investment officer of Cambridge, England-based Cantab and a friend of Braga’s, said on Bloomberg TV on Feb. 5.

“I’m sure we all remember 2008, when the equities markets were down 50 percent,” Kirk said. “That doesn’t necessarily mean that investing in equities is wrong or that it’s never going to work again.”

Systematic funds including BlueTrend, Cantab and Man Group Plc’s AHL Diversified and AHL Evolution returned some of the highest numbers among hedge funds globally last year. Investors began allocating to the sector again in December, according to data compiled by eVestment, an Atlanta-based firm. The Newedge CTA Index, which tracks 20 top systematic funds, rose 15.6 percent last year after a flat 2013 and two down years. It’s up 2.7 percent as of Feb. 19.

Ducati Monster

Innovation is crucial for systematic firms, and part of Braga’s role is to spark the creative process for her team to come up with new ideas, she said.

“There’s a creative moment when you think of a hypothesis, maybe it’s that interest-rate data drives FX, so we think about that first before mining the data,” she said. “We don’t mine the data to come up with ideas. Otherwise you just find incidental data. If it’s just a pattern in the numbers, that’s a weak reason. So it’s much better to say you can see why market such-and-such will tank or will rally, and then you hang on to that thesis, because that is a valid idea.”

About half the time, the ideas her team comes up with lead to improvements for the models, she said. They’re constantly tweaking them without stopping them, she said.

“We tend not to intervene with the car itself,” said Braga, who until recently rode a pearlescent white Ducati Monster 700 motorcycle. “But the engine gets fine-tuned.”

Rio Upbringing

Braga was born and raised in Rio de Janeiro. She moved to London in 1987 to attend Imperial College, where she earned her doctorate. She led research projects and lectured at the university for three more years before joining JPMorgan Chase & Co. in London, where she spent about seven years as an analyst on the derivatives research team.

There, she met Platt, who was on the New York-based bank’s proprietary-trading desk, and Bill Reeves, whom she joined at BlueCrest in 2001 after a brief stint as the head of valuation service at Cygnifi Derivatives Services LLC, which was spun out from JPMorgan and failed.

She started out managing $300 million for BlueCrest Capital International. As her strategy became more successful, BlueTrend became a separate fund in 2004. It wasn’t until 2008, when it returned 43 percent during the worst year ever for hedge funds, that money began pouring in. BlueTrend’s annualized rate of return from when it began trading on March 31, 2004, through the end of January was 11.8 percent compared with a 7.6 percent annualized return for the Standard & Poor’s 500 Index.

Sharpened Saw

Braga “is very smart and unbelievably committed to what she does,” said Luke Ellis, president of Man Group, which owns quantitative-trading funds that compete with BlueTrend.

At a BlueCrest employee meeting in early 2009, after BlueTrend’s record 2008 returns, Braga thanked her team and then said the single-digit returns for Platt’s BlueCrest International were just as impressive considering the market turmoil, according to a manager who ran a separate fund and asked not to be named. Braga reminded everyone to promote the firm as a whole, rather than individual funds, the person said.

That same year, she began a push to figure out how her fund could improve, leading to the inclusion of new instruments and work on equity-related quant strategies, the person said.

The redemptions at BlueTrend that began in 2013 would have been worse without her outreach to investors, according to two people with knowledge of her efforts.

Now that she’s chief executive officer of Systematica, Braga is her own best selling point. Her performance at the off- site meeting in Geneva after a day of technical presentations -- what she calls “sharpening the saw” -- is a case in point. Two of her employees joined in singing, and the firm’s band backed them up, Braga said.

“Nobody wanted to sing in the beginning, and I believe in leading from the front, so despite my lack of talent, I did sing,” Braga said. “The good news is that others get up on stage and sing now.”

--With assistance from Saijel Kishan in New York.

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Robert Friedman, David Scheer

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