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Hedge fund mines a rich vein melding algorithms with 16th-century theory

First Quadrant LP's US$1 billion Absolute Return Currency Fund hinges on a theory with roots in Renaissance Spain that asserts that currencies eventually adjust so their purchasing power equalises. The fund has been betting on the dollar, euro and yen, against a basket of equally weighted currencies, and has returned 9.9 per cent over the past year, topping 13 rivals.

THE market turbulence leading investors to flee hedge funds around the world is providing a measure of vindication for one asset manager.

First Quadrant LP, which manages US$11 billion in foreign-exchange strategies, relies on computer models that crunch data such as interest-rate...

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