[Merlyn]

=
=

Another warning...

Winton's Harding `Worries' About Exchange Shutdowns, Holds Cash
By Tom Cahill

Oct. 24 (Bloomberg) -- David Harding, founder of $15.5 billion Winton Capital Management LLC, said he is holding more cash on the possibility that exchanges may be closed.

``The thing I worry about is they shut exchanges,'' Harding said at the Hedge 2008 conference in London yesterday. ``If at all possible, I don't want to be exposed to that with my clients' money.''

Harding, 47, who is the ``H'' in the AHL Diversified Plc computerized trading program founded in 1987 and run by Man Group Plc, said Winton has about 95 percent of its assets in U.S. Treasury bills and cash or cash equivalents. That compares with about 90 percent a year ago. Futures markets require less cash up front to buy contracts than other investments such as stocks. Winton's cash balances are held in segregated accounts at two different custodian banks, rather than with prime brokerages, which Winton doesn't use.

Nouriel Roubini, the New York University Professor who spoke at the same conference, told delegates ``don't be surprised'' if policymakers shut exchanges. Italian Prime Minister Silvio Berlusconi roiled markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.

Harding, who often says the biggest risk to so-called managed futures trading systems such as his is a market closure, said he thinks it unlikely regulators will taking such drastic measures. Still, the chances of them doing so have risen, he said.

Running Lower Risk

``Everything for me is a probability,'' he said in an interview. ``Because there's a probability an exchange can be shut down, I'm running lower risk.''

The Winton Futures Fund, Harding's largest fund at $7 billion, has risen about 14 percent this year compared with the drop of 9.4 percent through September for a weighted composite index of hedge funds tracked by Hedge Fund Research Inc.

Harding said his funds are among those that have seen an increase in redemption notices to pull money out.

``They're not redeeming because we've done something wrong, or they don't like the cut of our jib, it's because they need the money,'' said Harding. ``I'm glad we're in a position where we can give them their money back.''

Harding, whose programs trade more than 100 different futures contracts on 28 exchanges around the globe, admitted he may be ``paranoid'' with his concern that major exchanges could be shuttered to stall market declines.

``You might think we're paranoid, but what we haven't yet done is buy farms in the mountains or gold coins,'' he said.

Still, Harding said he should have shown more caution for his personal account. He had an account with Lehman Brothers Investment Management, which is now frozen in the world's largest bankruptcy.

LINK:
http://www.bloomberg.com/apps/news?p...So&refer=funds

=
=