In one week, beginning August 6 2007, some of the largest and most prestigious market neutral quantitative equity funds suffered enormous losses, with some falling 30 per cent or more in just four days.

Morgan Stanley’s quantitative strategies group lost $390m (£192m, €275m) in one day, according to its 10-Q filing with the Securities and Exchange Commission. Total losses for the quarter, which the bank says occurred principally in late July and August, were $480m. Goldman Sachs’ Global Equity Opportunity hedge fund was reported to have lost up to a third of its value – more than $1.5bn – that week, although it subsequently rebounded.