November 28, 2012 7:39 pm

Dismal year for quantitative hedge funds

Quantitative hedge fund managers are facing up to one of their worst years on record as losses mount for many of the sector’s biggest names.

BlueTrend, the $11bn Geneva-based fund run by Leda Braga, dropped 5.3 per cent in October, bringing year-to-date losses to 3.1 per cent, an investor in the fund said.

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Winton Capital, the world’s largest quant fund, with $26bn under management, has seen its flagship futures fund drop 5.65 per cent in the year to November 27.

Aspect Capital, another large London-based quant fund, is down 11.7 per cent in the year to November 21.

AHL, the $16bn flagship fund of the Man Group has fared better, though is still on course to lose money – the fund was down 2.8 per cent as of November 19.

Historically, all four funds have averaged double-digit annual returns. And while AHL has seen losses partly pared by the development of a new trading portfolio, which has recorded large gains this year through bets in esoteric markets, there are few signs performance will pick up in the current environment for most funds’ core strategies.

While most so-called trend followers, which use complex computer code to spot and ride market trends, recorded huge gains in 2008, they have floundered since.

Unorthodox monetary policy and widespread political intervention in markets have left many unable to ride trends long enough to make money. Rangebound “RoRo” – risk on, risk off – conditions have proved particularly tricky for computers to judge.

Other big-name quant funds set to lose money this year include Renaissance Technologies Futures Fund, which was down 6.1 per cent as of mid-November, and the Highbridge quantitative commodities fund, which was down 10 per
cent as of the end of October.

According to Hedge Fund Research, the average systematic fund has lost 3.2 per cent so far this year. The average hedge fund has made 4.5 per cent.

Credit strategies have been among the top performers. The average fixed-income hedge fund has made 8.9 per cent, according to HFR.

Top of the pile, however, are hedge funds that specialise in trading asset-backed bonds, including those that caused huge losses for the banking system in 2008.

Asset-backed bond-focused hedge funds have made, on average, 14.35 per cent so far this year as US mortgage markets rallied strongly.

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