Great Trades of History: Leda Braga vs the 2008 Financial Crisis. Photo: Women in Hedge Funds (Flickr)

Great Trades of History: Leda Braga vs '08 Financial Crisis

“The flow of bad news quickened and everybody around us seemed to panic.”Leda Braga to FI News</cit

2008 was generally not a good year for finance. Lehman Brothers investment bank collapsed, which was to be followed by a wider banking crisis and global economic decline.

But for some, it was not so bad. Take Leda Braga, then managing the BlueTrend hedge fund. She made an astonishing 43% return that year.

What is even more astonishing is that the way she achieved this was by… doing not much. All that changed was the firm’s calendar. “I asked my team to postpone their holidays, so we could all be on deck,” Braga told FI News some years later.

While some of her colleagues wanted to make alterations to the BlueTrend strategy, Braga refused. After a research process, she did not believe that anything had happened that merited changing the firm’s investment plan.

Known in some circles as ‘Queen of the Quants' Braga is an algorithmic trader. She holds a PhD in engineering from Imperial College London and started her career in finance with JP Morgan in roles including a quantitative analyst on the firm's derivatives research team and manager of Cygnifi Derivatives Services, a spin-off from the bank. She then joined BlueCrest, the manager of the BlueTrend fund.

Trading Legends: Leda Braga

The funds she has managed – at BlueCrest and in recent years at her own firm Systematica Investments – use technological systems to trade in accordance with trends they have detected in the markets, a strategy well known to traders as “trend following”. In 1998, Braga simply had faith that this system would work – and was proved to be right.

In the years since then, however, her strategy has not always been as lucrative. BlueTrend even made it into The Sun after losing £1.8bn over six weeks in 2013.

But, as The Economist pointed out, some think that losses could be due to interference by political entities in the markets in the wake of the financial crisis. “Not even the world’s wiliest supercomputers can predict what the European Central Bank will dream of next, apparently,” it said.

Braga continues to have faith that algorithmic trading is a better way to make money from the markets than its alternative: manual stock-picking. “You think the discretionary guy has what? A crystal ball?” she asked a conference audience in 2015. “At the end of the day, the business of investment management is the business of information management. I think the algorithmic approach is very good approach to do it,” she says.

Regardless of exactly how effective it is across various market conditions, Braga’s strategy has one key advantage over those of many of her male star-trader peers: it will outlast her. Because it is based on decisions made by technological tools, her leadership is not essential. “What we do, through algorithms, through equations, through code, means that the intellectual property exists in its own right. If I disappear tomorrow, that’s fine,” she is quoted as saying in Michael W. Covel’s book Trend Following.

Braga is also looking to the future by launching a retail version of one of her funds in conjunction with Old Mutual Global Investors, which was announced at the end of 2017.

Whether the average trader on the street backing this vehicle can expect a 43% return every year remains to be se seen. But unless you have your own crystal ball, it’s surely worth keeping an eye on.

“It doesn't matter quite so much that you be right at every forecasting point. It does matter that you're right more than half the time.”Leda Braga to CNBC