One of the U.K.'s most successful hedge fund managers has spoken of the benefits of using the "emotionless systematic approach" of automated stock-picking rather than following a consensus trade.
With $25 billion in assets under management and 340 employees, David Harding's Winton Capital is the world's 14th-largest hedge fund firm, according to investing publication Alpha magazine. Winton is a commodity trading adviser (CTA) fund which is a hedge fund that uses financial innovations like futures contracts and are usually systematic traders or trend-followers.
Often dubbed as the "Wizard of Winton," Harding is known in the industry for profitable long-term bets on oil and gold, as well as making hay during the global financial crash of 2008. Harding is a fan random stock-picking – selecting any 50 stocks and weighting them equally -- rather than tracking an index like the .
He told CNBC Thursday that his computer has helped take advantage of the trends in the oil markets, the sovereign debt markets and the U.S. dollar which have made the firm "lots of money."
"Last year, the CTAs, fortunately for them, for once, were a clear winner," Harding told CNBC at the Investors Choice Awards in London on Thursday.
"And they're a clear winner because (of) their computers. Absolutely everyone was bearish on bonds last year. Everyone thought interest rates will rise. It was absolutely universal."
Noting his experiences at the World Economic Forum in Davos last year, he said that some of the most intelligent and most informed investors had been wrong on sovereign bonds which saw yields tighten lower last year despite many believing that interest rates in the U.S. would rise.
"They couldn't have been more wrong, it illustrates the phenomenal and fantastic unpredictability of markets," he said. "It illustrates the advantage that the systematic approach has."
This approach takes and holds positions that individuals are physically not able to have because they are too affected by the consensus, he explained.
"If you want to follow a contrarian strategy, the computer, the robot is much more able to follow the contrarian strategy than an expert. You'd think it's a disadvantage, but it certainly wasn't last year."
The three biggest trades last year were "like shooting fish in a barrel," according to Harding, who added that CTA managers deserved it because of the "three or four pretty tough years" that they had recently experienced.
