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Man Group to launch computer-driven bond hedge fund

Date: Friday, April 20, 2012
Author: Laurence Fletcher, Reuters

Hedge fund manager Man Group is developing a computer-driven government bond fund, aiming to attract investors put off by the ultra-low yields in many developed fixed income markets and worried about further debt defaults.

The Man Systematic Fixed Income fund, yet to be launched, will try to identify and profit from dislocations in liquid government bond markets.

"Traditional fixed income investing (is) unattractive," Man's Systematic Strategies unit said in a note, citing "yields close to zero percent, increased credit risk in many government bonds, (and) little upside (and) big downside of being long bonds in (the) current environment.

"Market inefficiencies (are) likely to prevail in fixed income markets, creating investment opportunities."

A spokeswoman said on Thursday MSS was working on the fund and declined to give a launch date.

Investors have grown nervous over a number of government bond markets during the euro zone's debt crisis, which last month saw Greece win acceptance from private creditors to avoid an uncontrolled default.

Fears the global economy could worsen and concerns over the bonds of peripheral euro zone countries have seen yields on German five-year bonds, viewed by many investors as a safe haven, fall to 0.65 percent and yields on U.S. five-year bonds fall to 0.83 percent.

The fund will be the fourth portfolio run by Man's (EMG.L) one-year old MSS unit, which manages $1.6 billion (994 million pounds) assets.

The unit is run by Sandy Rattray, who co-developed the VIX .VIX volatility index, also known as the "fear index", widely used to measure investors' perception of risk.

Last month Man announced the launch of the Man Commodities fund, also run by MSS, which uses algorithms to trade 25 commodity futures contracts and also allows human intervention.