Trouble for Quant Hedge Funds

The rise in market volatility has resulted in poor results for many quant funds, according to a recent Bloomberg article that says, “They were caught flat-footed in February when markets turned turbulent on concern over rising interest rates, followed by trade wars with China and the election in Italy.” The article reports that Renaissance Technologies, the world’s most profitable hedge fund, is trailing its benchmark in one fund this year (through mid-June) and that Jaffray Woodriff,… Read More

Ed Thorp Interview Highlights

A recent, two-part article in Barron’s summarizes an interview with mathematician Ed Thorp, who gained celebrity after figuring out how to use his skills to “beat the casino at roulette,” then applied his techniques to the stock market and wrote best-selling books about them. Here are some highlights: Thorp explained, “In high school, it occurred to me that the roulette ball moves in a stately orbit like a planet…and I was convinced I could predict… Read More

Insights on Increasing Concerns Regarding Quant Funds

A recent article in Institutional Investor recalls the “quant bloodbath of August 2007” and offers insights regarding if and how the increased popularity of these strategies and the associated rise in leverage may be increasing the risk of another “downfall.” The article offers details regarding the 2007 calamity, when “some of the biggest and smartest hedge funds in the world suddenly tumbled in tandem, as their algorithmic trading systems went hay wire.” The reckoning, the… Read More

Quant Funds Showing Weaker Returns

Decreased returns from computerized investment strategies (“quant” funds) suggest that the robo revolution could be slowing down, according to a recent Bloomberg article. According to Eagle’s View Asset Management founder Neal Berger, the article says, quant fund returns have been losing ground for a year, “suggesting the rest of the market has figured out what the robots are doing and started taking evasive action.”   According to Fred Branovan of FFC Capital Corp., “market neutral funds… Read More

Quant Funds Attempt to Disrupt Market

Quantitative hedge funds—that use mathematical algorithms to effect trades—are becoming increasingly popular, “reflecting in part a long run of underwhelming performance and expensive fees across the broader industry,” according to a recent article in the Financial Times. “Now,” the article says, “the widening access to faster and cheaper computing power, coupled with an explosion of new data sources like satellite images, internet chatter and online commerce, has encouraged a new wave of scientists and programmers… Read More