At a recent investor meeting for a prominent fund of funds, several hedge fund managers positively crowed about their research activities.

Not only do their analysts routinely question managements and dissect company literature, they also seek out dealers, suppliers, and customers in their quest for an investment edge. Imagine that.

Guess what – this is not a novel concept. In the 1960s and 1970s, analysts actually created original research before investment banking and institutional marketing got a chokehold on their time. Now that investment results are again driving compensation, it follows that such efforts are in vogue once again.

But not everywhere. Across town, a group from Austria called Quadriga Capital is rounding up lots of investors by virtually guaranteeing that no human will interfere with the management of their capital. Certainly not research analysts, or anyone else with pretensions to knowing where stocks should sell.

Quadriga practices instead “black box” trading. Quadriga is a trend-follower that has a computer model calling the trends and the trades. Trend-following and computer-driven trading are not new. The concept is, perhaps, the ultimate expression of the “random walk” theory of investing.

The premise is that investment research is useless, since all known facts are already reflected in the prices of securities. (This is an over-simplification, as no doubt many will point out.) Therefore, the only trading that makes sense is that which capitalizes on existing trends, since there is no way of predicting what will turn those patterns around.

Quadriga’s approach is unusual in that they are marketing to the retail investor, requiring an investment minimum of only $5,000, rather than the more customary $1 million threshold.

Why? Because it is more lucrative. Quadriga charges hefty fees that institutional investors would not put up with, and gets away with it for two reasons.

First, the returns earned have been substantial. Second, retail investors don’t have many choices in this arena.

What are the fees? Brace yourself. The company charges a 1.85% management fee, a 25% performance fee (after breakeven), an annual 4% sales commission, a 1% “offering expenses” fee, brokerage fees of 3.75%, and various other expenses. All told, in one fund, before the investor earns a dime, the fund has to be up an estimated 8.75%.

So how has Quadriga earned the right to charge such whopping fees? By turning in considerably above-average performance in most time periods, and by convincing investors that their approach will continue to work.

Except that, recently, it has not. This year has been particularly grim for trend followers, because there have been few clear-cut trends to follow. That’s the word on the street, though an observer might suggest that strong upward trends in oil, the euro, interest rates, and gold should be enough to work with. But evidently not.

Quadriga Superfund L.P. offers two funds to American investors – both modeled on successful similar funds in Europe. The only difference between the two is the amount of leverage used. Series B employs 1.5 times the leverage of Series A. The leverage available to Series A is already 4 or 5 to 1.

Though September was up 10.4% for series A and 14.75% for Series B, that did not erase the declines posted earlier in the year. Year-to-date, the funds are off 5.6% and 7.3%, respectively. The two Series were launched in October 2002; for the final quarter of that year investors were up 9.7% and 16%; 2003 brought further gains of 20.2% and 27.7% respectively.

The funds trade in some 100 futures and cash foreign currency markets globally. More specifically, the portfolios tend to have about 18% of the assets in currencies, 18% in stock indices, 13% in energy futures, 14% in grains, and lesser amounts in livestock, agricultural, metals, and interest rate futures.

The portfolios are designed to have low correlation with traditional market indicators, and also low cross-correlation (meaning that different segments should respond differently to events). Also, the vehicles chosen are meant to be quite liquid, since the portfolio tends to have high turnover. Quadriga acknowledges that the portfolios are volatile, and indeed they are.

The trading is done by a computer model developed by the firm’s founders and owners, Christian Baha and Christian Halpert. Mr. Baha was originally trained as a policeman in Austria, where he graduated from the police academy in Vienna. He went on to study at the Business University of Vienna, and then in 1991 teamed up with Mr. Halpert to launch a technical analysis program for institutional investors.

That enterprise became Teletrader.com Software AG, a publicly traded company on the Austria Stock Exchange which provides financial software for institutions around the world.

The two started Quadriga in March 1996, and launched one of the earliest retail hedge funds (Quadriga AG) in Austria. Within a year the fund was being totally computer-managed, and the company’s platform was established.

The team stresses four components to their approach: market diversification, technical trading, trend-following, and money management. The name Quadriga evidently comes from the ancient four-horse chariot of Roman times. Each horse had special individual qualities which were complementary to the others and were essential to the whole.

By money management, the firm means risk management. In their case, losses are kept in check by an automated trigger that limits losses in any position to 1.5% of assets. In other words, they have constantly moving stop-loss orders in place to protect them on the downside.

Still, they have had plenty of scary months in which the original European fund was down by as much as 17%. Quadriga AG has an annual standard deviation of 24.5%, which is high.

The firm acknowledges that there is a limit to how much money can be managed in these strategies. Today Quadriga has $1.6 billion under management; less than $150 million is invested in the two American funds.

The mysterious world of “black box” trading may not appeal to everyone, but for the hardy few, the rewards may prove generous – that is, assuming that some decent trends get underway. Otherwise, Quadriga may have start thinking “outside the box.”

Ms. Peek is a former managing director of Wertheim Schroder, now a part of Citigroup.