The amount of money managed by so-called quant funds has dropped by up to 40 per cent in the past six months, as the drawbacks of the once rapidly growing strategy have been laid bare by the credit market turmoil.

Quantitative management, which uses computer models to make trading decisions, is behind the success of some of the best known hedge funds and institutional managers. Some estimates pegged the amount managed this way at about $500bn before the slump hit.