City police and fire departments invest $134M in exotic quant fund

Bloomberg News

It’s all in a day’s work for New York’s finest.

The pension funds for New York City’s police and fire departments last month allocated a combined $134 million to London-based Florin Court Capital. At first blush, it’s an odd pairing: the quant shop follows trends in hard-to-trade assets from European power to cryptocurrencies.

This would be an exotic trading strategy at the best of times for even advanced investors like the storied pension institutions of New York City. Right now, it stands out because frenzied markets have battered the average returns posted by trend-following quants, also known as commodity trading advisers.

Yet the appeal of momentum-trading strategies—most of which trade liquid instruments like bond and stock futures—endures because investors are on the hunt for what some in the industry call “crisis alpha,” or funds that will outperform when markets crash. It’s reinvigorated appetite for CTAs, which returned a profit each time equities fell at least 15 percent between 1985 and 2016, according to a study by Man Group.

“Given where equity markets are and where interest rates seem to be headed, they’re looking for extra diversification,” Doug Greenig, the founder of Florin Court and a former chief risk officer of Man’s AHL unit, said of the pension allocation. “The exotic, alternative markets angle was critically important to them.”

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