The Battering of Quants

Bloomberg wakes up to the fact that momentum quant funds have been getting killed:

Companies with the most debt and lowest returns on assets are turning the biggest six-week rally in stocks since 1938 into a bloodbath for last year’s best- performing trading strategy.
Investors using so-called quantitative momentum strategies — which speculate that the worst stocks in the past 12 months will continue to decline — have become this year’s biggest losers after banks and companies that rely on consumer spending surged. Quant momentum managers may have lost 27 percent this month in the U.S., the most since at least 1993, while those in Europe may have dropped 20 percent in March and 24 percent in April, according to data compiled by JPMorgan Chase & Co.
“Not in a million years would we have expected this gyration to be as vicious and enduring as it has been,” Steven Solmonson, the head of Park Place Capital Ltd., a hedge fund that oversees $150 million, said in an interview from New York. “The quants got whipsawed badly.”

Posted by on April 20th, 2009 at 12:30 pm


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