The founders of AHL, which spawned Aspect and other firms, shared a passion for physical science. Lueck, the ‘L’ in AHL, and Anthony Todd both studied physics at Oxford, and were introduced by Michael Adam, the ‘A’ in AHL, who was Anthony’s physics practical partner at Magdalen College, as well as a school friend of Lueck. Todd focused on experimental physics, testing hypotheses in the Clarendon Laboratory while Lueck instead specialised in theoretical physics in his final year.

After graduating, Adam started to investigate systematic futures models at his father’s commodity business, which Lueck joined after a spell at Nomura. In 1987 they met David Harding, the ‘H’ in AHL, and created AHL. Adam persuaded Todd to come on board a little later in 1992, after business school and a stint at UBS Phillips and Drew. They sold an initial stake of AHL to Man Group which bought out the remaining minorities in 1994. The group then splintered. Harding left to set up Winton, while Adam launched a software venture capital firm but invested in Aspect at its inception and joined later spending several years as Risk and Research Director.

Lueck left Man Group on good terms in 1995, and spent a year helping his wife establish her publishing business Barefoot Books. He regrouped with Todd and the third Aspect founder and AHL colleague, Eugene Lambert, who should not be forgotten. “The business would not be here today without him [Lambert]. He worked at AHL for many years, becoming Head of Trading Systems Development, and was a brilliant programmer and computer scientist,” recalls Todd. Lambert’s gliding hobby also supplied Aspect’s name, drawn from the Aspect ratio, which is the square of the wingspan divided by the wing area. “A higher aspect ratio creates a more stable aeroplane, and crucially results in a higher lift to drag ratio, which is analogous to risk-adjusted measures of investment returns, such as Sharpe ratios,” explains Lueck. Lambert, who remains an investor in Aspect’s strategies, left the firm in 2004 to spend more time gliding, travelling and writing prize-winning fiction.

Institutionalising CTAs

The vision behind Aspect was to institutionalise CTAs and bring valuable, liquid, transparent, diversifying return streams to portfolios. In contrast to most hedge funds, the first clients for managed futures and CTAs were retail investors paying very high fees, exit penalties and subject to lockups for structured products with principal protected guarantees. “Institutions liked the performance but found the structures unpalatable. Our vision was to build products to meet the requirements of institutional investors along with significant infrastructure and emphasis on R&D,” says Lueck.

Seeding search

If this now seems axiomatic, at the time it took considerable tenacity and perseverance to find a backer. “The worst moment was in 1997 when we were full of confidence. We held 62 meetings with private equity firms and pension funds and told a very compelling story about technology meeting finance, but in the white heat of the tech bubble we found zero interest, as nobody wanted to listen to us. The best moment was when we finally secured seeding of USD 40 million – a big ticket at the time – from successful fund of hedge funds RMF in 1998. RMF founder, Rainer-Marc Frey, was extremely supportive, and they took a 25% interest in Aspect in 1998, providing both working capital and seed capital for the funds,” recalls Todd. In 2003 Man Group bought 100% of RMF and thus acquired the stake, which Aspect later bought back. Aspect is now an independent and private company 97% owned by current employees.

Enduring firm culture

Aspect’s culture and ethos document written at the outset in 1997 is not public but is available to all Aspect staff. “The values that we considered important – openness, transparency, mutual respect and love of a challenge – are a testament to the people we are and wanted to work with, and we have retained these values; the document has not been revised,” says Todd. Aspect has proudly been a Certified B Corporation since 2022 and feel that the B-Corp framework might well have been copied from their own philosophy: the business is not just about shareholders but also broader stakeholders.

DEI

Diversity, equity and inclusion committees are now ubiquitous, but again Aspect has been committed to these principles, and to philanthropy, from the start. “We embrace diversity and have built a broadly based diverse team and demonstrated impressive longevity and continuity. We have a responsibility to contribute to society and put something back. Our first committee was Aspect’s charity committee,” says Lueck.

The firm is diverse by background, education, race, gender and ethos. In late 2024 staff are 27% ethnic minority and 36% female; and Aspect has received two diversity awards. Over the years, four women occupying senior roles at Aspect have been honoured in The Hedge Fund Journal’s 50 Leading Women in Hedge Funds report: Director of Technology, Gemma Hagen; Portfolio Manager, Max Dongyan Xu; Chief Commercial Officer, Rosie Reynolds; and former Chief Risk Officer, Anna Hull.

Social mobility and equality of opportunity are demonstrated by Aspect’s wholehearted embrace of the apprenticeship scheme, going well beyond just paying the levy, with six apprentices working across multiple areas of the firm, and plans to add more. Outside Aspect, Lueck’s wife’s business, children’s content publisher, Barefoot Books, also champions global diversity, inclusion and global awareness.

Collaboration

The distinctive, inclusive culture also permeates research. Multi strategy managers operate a famously siloed environment of ‘pods’, but Aspect finds a more collaborative environment is optimal for its style of research. “We get more scale out of a collegiate structure. We want to benefit from diversity of thought and background for the scale and size of our business,” says Todd. Aspect’s strong balance sheet, disclosed to staff, allows it to offer competitive salaries irrespective of investment performance. Staff do participate in performance fees in years like 2022, but remuneration is collaborative rather than formulaic and is not a function of independent or siloed efforts.

Fiduciary duty and transparency

Aspect has always prioritised research over marketing. “We have a vision to bring utility to a broader group of investors as a partner providing strong diversifying competitive performance, with no target for asset growth, which is secondary. In contrast, marketing-led firms have explicit asset growth targets. A broad vision of fiduciary responsibility is about what is best for the client, which differs from a narrower contractual or legal definition, which is more about what firms can get away with,” argues Lueck. Aspect has kept assets and capacity at levels that allow commodity markets, including some smaller and alternative markets, to make a substantial contribution to returns when strong trends emerge, particularly in some crisis years.

Quant investing can seem opaque, and some elements need to remain proprietary, but Aspect thinks it is crucially important to provide transparency, explanation and understanding, especially during challenging periods. “We always emphasise transparency and client service, whether performance is good, bad or indifferent. Around the SVB crisis in March 2023 we had a short sharp drawdown, and there was no contractual need to reach out to investors, but our culture meant that the investment solutions team worked over the weekend to understand the drivers in fine detail, and first thing Monday morning clients received an update. We often expect to be the first manager clients hear from,” says Todd.

Aspect Diversified and other strategies have been recognised by The Hedge Fund Journal’s CTA and Discretionary Trader Awards and UCITS Hedge Awards.

Strategy evolution complementing trend following

Faith in the diversifying qualities of trend following – versus conventional assets and broader portfolios of hedge funds – has been a constant, but models have evolved considerably. The key research streams have included: identifying trends; translating trend strength into market positioning; developing modulating non-trend factors; adding data types; investment universe expansion; portfolio construction and risk management; and improved order execution.

After a very strong run between 1999 and 2003, the strategy became more volatile and hit capacity constraints in 2004. “Others could see us coming as we left a trail in the market, and this led to quite a material reimplementation of models. We retained style consistency and avoided style drift but changed implementation with different filters to smooth out trading and avoid predatory behaviour. The changes started in 2005, and our returns were highly competitive between 2006 and 2008,” recalls Todd.

“In 2007 the flagship strategy also evolved from pure trend following to include complementary non-trend ‘modulating’ models such as carry, sentiment, relative momentum and seasonality, to smooth out returns and make it easier for investors to maintain longer holding periods,” recalls Todd. Additionally, the non-trend models utilise a mix of fundamental as well alternative data derived from nowcasting, fund flows, and through NLP (natural language processing).

The expansion of the investment universe, into both traditional and alternative markets, in developed and emerging markets, made intuitive sense and recent years have demonstrated the benefits of being exposed to powerful and persistent trends, including Eastern European interest rates, multiple energy, electricity and natural gas markets across various regions and countries, carbon emissions and cryptocurrencies.

Aspect has also invested in developing trade execution prowess to drive down market impact and open up more degrees of freedom, in terms of both adding shorter-term signals and expanding overall programme capacity.

Avoiding style drift

None of this has compromised the core beliefs in directional and asset class agnostic trend concepts, and a consistent hypothesis-based approach to research.

Aspect has diversified its trend models into trading frequencies from days to months because different speeds work better in different asset classes over different periods, but the firm has not deviated from the core asset class agnostic trend approach. While some CTAs have become consciously or accidentally biased to long risk premia exposure in equities or bonds or both, Aspect has been vigilant about beta creep that could have made it harder to deliver diversification benefits in a year like 2022. Aspect remains agnostic on market direction and has even introduced overriding caps on long equity and bond exposure into some strategies. It maintains a balance amongst asset classes because it thinks extrapolating from recent relative trend performance would be “overfitting”.

The research process has also applied a consistent scientific approach harking back to the founders’ study of physics. “A research project starts by articulating an underlying claim, then carries out scientific analysis that either supports or disproves the claim. And a rigorous research process is built on a belief in collegiate research across a diverse team with diverse skillsets for several points of view. That has stayed the same as we have grown from 3 to over 140 people, 90 of whom are focused on R&D,” says Todd. The research must be underpinned by a plausible hypothesis based on some fundamental process.

While Aspect has introduced modern statistical techniques, a purely data driven approach based on observed phenomena can fall prey to spurious correlations. AI and machine learning tools are used as a productivity tool for the whole firm, through front, middle and back offices, and also feature in some parts of the research process. “Some problems do not lend themselves to machine learning, though it can be useful in finding complex relationships that are not visible to the naked eye. We put great importance on explicability when applying machine learning techniques,” explains Lueck.

Standardised and customised strategy menu

In late 2024, Aspect’s three main strategy pillars include two prepackaged strategies: trend following and multi-model absolute return investing, and bespoke customised solutions that can draw upon any or all of the firm’s expertise.

Trend following can still be accessed on a pure play basis without modulating factors, and through “flat fee” products with no performance fee. It can also be applied to alternative markets (where the non-trend sleeve is 10%) and to Chinese futures (where models are calibrated to local markets).

In contrast, multi-model multi-asset absolute return aims to deliver a source of stable, diversifying returns irrespective of the market environment, by using an optimal blend of directional and relative effects.

All of Aspect’s models can be used as building blocks for the customised portfolios, where investors can select their flavour of trend and combine it with various other uncorrelated, non-trend models to flex a solution that best fits their existing portfolios. Investors have a wider menu of strategy options to mix and match according to their own unique utility functions, including return targets, diversification objectives and risk tolerances. For instance, for risk mitigating exposures, shorter-term models, and volatility strategies are the first responder, while core trend is the second responder. Volatility strategies increasingly need to be calibrated more precisely to clients’ utility functions, tolerance for bleed, and need for tail risk protection, and may be combined with trend.

A customised mandate can later become a commingled product. A reverse enquiry request for a 60% equities/40% bonds mix overlayed with Aspect’s trend following has been packaged into a US structure that caters for investors who want the diversifying, defensive characteristics of trend while maintaining a strategic allocation to equities and bonds. Unbundling these elements, the trend part can also be offered as a portable alpha overlay which can be accessed through cash efficient managed accounts.

Roughly one third of Aspect’s circa USD 9 billion of assets under management are now in customised strategies. Aspect has raised assets in Asia, North America and Australia as well as Europe, and is recommended by leading investment consultants and private wealth managers.

Philanthropy

Aspect has supported hundreds of charities large and small selected by its staff. Aspect’s charity committee invites employees to propose their chosen charities, and Aspect matches their gifts. There have been fundraising activities such as treadmills and rowing machines in the office and several lapathons in Hyde Park.

The founders also have personal interests in particular charities. The Lueck Collaboration Space in the Beecroft Building as well as support for teaching and research at Oxford’s Physics Department is a personal philanthropic focus for Lueck. He also chairs the Oxford Physics Development Board.

Todd’s first job between school and university was nine months spent cleaning in a psychiatric hospital, which was a formative experience, where he met victims of sexual abuse, substance abuse, domestic abuse and broken homes, who would otherwise be homeless. Later, Todd was horrified to see many such hospitals closed down, and decided to support a charity called The Passage which provides accommodation and health clinics designed to stop homelessness.

Looking forward

“We’re extremely proud of the people and work of Aspect,” says Lueck. “Founded on a vision to institutionalise and democratise quant investing for the benefit of almost all investors, we have built an extremely talented and experienced team and strong relationships with investors globally. Like all research, our work is never done, and we are excited about developments currently in the research pipeline and no doubt what lies beyond that,” adds Todd.