Who Let the Professors Out? Inside CFM
The $27bn quant on Paris’ Left Bank
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Stock markets are surging, and momentum is rampant. It made me think of CFM wizard Jean-Philippe Bouchaud who believes that it is fund flows that drives markets and not fundamentals.
I briefly wrote about CFM a year ago but since then the company has grown considerably. CFM’s website states that it had more than $26.5bn of AUM in April 2026, a huge increase on what management disclosed in interviews last year. Adding almost $10bn of AUM makes it one of the fastest growing hedge funds in the world. Its growth rate has kept pace with French competitor QRT over the last two years.
CFM has traditionally been focused on institutional clients. But With Intelligence recently reported “CFM is looking to grow via its existing wealth channels, having set up partnerships in recent years with Stifel and iCapital as retail investors are bullish on quantitative multi-strategy products.”
In this piece I discuss:
CFM’s history and academic pedigree,
Jean-Philippe Bouchaud’s views on flows and EMH,
CFM’s data and product expansion,
The firm’s execution layer,
CFM returns relative to peers,
And revenue per employee.
Background
Capital Futures Management was started by founder Jean-Pierre Aguilar as a systematic futures manager/CTA in 1991. Aguilar partnered with Jean-Philippe Bouchaud to create Science and Finance, a research company working to develop new models for CFM in 1994. The two firms were merged in 2000.
CFM changed its name to Capital Fund Management in 1998 reflecting its broadening out to a wider range of quantitative strategies.
Since Aguilar’s untimely death in 2009, CFM has been run by a managing committee, which currently has five members. Bouchaud is Chairman and Chief Scientist. The employees own 75% of the firm with Blue Owl Capital the only external shareholder with a 25% stake.
Academic pedigree
CFM likes to share its thoughts on market microstructure in a similar fashion to AQR, but its academic pedigree reminds me of RenTec.
There are the obvious differences – Bouchaud is not in the same league as Simons, neither are CFM’s returns relative to RenTec’s incredible run and CFM is not secretive like RenTec.
But having written about all the Maths Olympiads being hired as graduates by quant firms last week, there is no firm as “professor like” as CFM apart from RenTec. Simons famously said “We don’t hire people from business schools. We don’t hire people from Wall Street. We hire people who have done good science.” Almost one-third of RenTec’s headcount has PhD’s in physics, maths and related subjects.
CFM also hires largely in the same way. It has a deeply academic culture, and one based on collaboration like RenTec. Three of the five CFM Board members have PhD’s in physics. The firm is deeply entrenched in the top French science and engineering schools.
Bouchaud spent a decade teaching at École polytechnique and now teaches at ENS. He cites this culture and his teaching as crucial to the credibility of the firm to attract the best academic researchers. CFM has academic partnerships with Imperial College in London, ENS, Ecole polytechnique and Columbia University.
The collaborative culture at CFM, shows up in how the firm pays its employees. Researchers also get the best of both worlds with their significant ability to publish research externally.
All about flows
Jean-Philippe Bouchaud has become so cool that he was invited for an FT lunch late last year with Robin Wigglesworth, who also had a FT lunch a year earlier with the great Nobel laureate Eugene Fama.
The FT lunch was less on CFM’s success and more on Bouchaud’s views on the flaws of Black-Scholes and Efficient Markets Hypothesis. Bouchaud said “The whole bull run is because of an influx of money.”
This was a theme he returned to a few weeks ago in a fantastic Bloomberg podcast with Barry Ritholtz. The latter linked Bouchaud’s views with Ben Graham’s famous saying, ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’
Bouchaud has for decades talked and written about the overpowering ability of fund flows to drive stock prices and not fundamentals. A 2020 academic paper by Harvard and University of Chicago Professors Gabaix and Koijen “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis” formalized this hypothesis and quickly went viral. Bouchaud was a big supporter of the work. He believes that in anything up to a year fund flows trump fundamentals. He told Ritholtz “On the short run — short run meaning from one day to one year, which is pretty long already — it’s really flows that matter.”
Data moats
CFM started out looking only at technical data (largely market data such as order book related), added fundamental data in 2005, weather and environmental data in 2010 and unstructured alternative data such as satellite imagery in 2019. It’s technical data today is not just transaction prices but also volatility, sentiment, macro and flow data.
Two-thirds of CFM’s current model signals were discovered after 2018 reflecting the increased pace of alpha decay and the need to discover new data and signals quicker than ever.
CFM and its top team like to talk about its ever-growing data library. The company’s website says it has 12 petabytes of stored data. This is very small compared to a quant giant like Two Sigma, who say on their website that they have more than 380 petabytes of stored data. Of course, the amount of data stored doesn’t equate in a linear fashion to alpha, which depends on signal strength and researcher quality.
Product range
As highlighted earlier CFM pivoted from a pure play managed futures/CTA fund to other models incorporating a wide set of quantitative strategies in the mid-nineties. This included statistical arbitrage and volatility/options arbitrage. Over time CFM expanded from technical models like mean reversion and momentum into more fundamental analysis understanding cause and effect and correlation.
The first managed futures/CTA type fund Discus was launched in 1991 but only reached $1bn in 2006. Today it manages more than $2bn on a standalone basis and many billion dollars within the broader multi-strategy fund. It produced net returns of 35% in 2022, the third best year in its 35-year history. 2026 has also started very strongly for Discus.
According to the Hedge Fund Journal, Discus has evolved from a pure trend-follower as these strategies have become more commoditized. It has a low correlation to industry peers. The blend of models has grown to 150 different predictors, around half of which are market neutral, relative value strategies. The latter is fast growing and expected to provide better Sharpe ratios. Examples of types of trades are pairs trades of different European stock indexes against each other. The global macro component of Discus is also larger than the traditional trend-following component today.
Discus is also a great example of funds changing their frequencies over type in line with alpha opportunities. Hedge Fund Journal stated “Discus is categorised within the short-term trader space but has moved its time frames around. It began with average holding periods of 50 days in the nineties, sped up to one day in the noughties, ceased its long-term models in 2004, and has now slowed down to average holding periods of between 15 and 25 days over the past 10-11 years. The time frames mix short and medium frequencies.”
For those looking for pure trend-following CFM launched the IS Trends range of funds in 2019 with variations including the IS Trends Equity Capped (ISTEC) combining: long term trend following (7-11 months) using moving average signals; short term trends of around 2 months focused on the most liquid bonds and equity indices, and a long futures position in the VIX index of implied volatility.
Discus remains a key building block of CFM’s flagship multi-strategy fund Stratus, that launched in 2003. Whereas Discus trades futures and FX, Stratus also trades tens of thousands of single stocks, equity options and other asset classes.
Stratus grew to $4.4bn by 2012 and by 2025 it was managing $12bn. Last year CFM closed Stratus to new money and returned $1.4bn to investors. Stratus charges management fees of 2% and in 2024 increased performance fees to 30%.
With many of the strategies within Stratus being capacity constrained, CFM took the more scalable signals and put them into a new fund launch at the start of 2024 called Cumulus. This fund has around 50% correlation to Stratus.
Cumulus manages more than $2bn today and CFM has stated in the past that this fund has capacity for around $5bn. It has much lower fees than Stratus at 1% management fee and 15% performance fee.
