Even though this year has been better for some, they wonder if it's just a temporary good streak. They don't believe that it's possible to make any lasting changes, especially after years of struggling. Suhonen said that many people have given up on trying to improve their financial situation. He estimates that total assets in these strategies have dropped by as much as 50% since his $200 billion estimate at the end of 2019. The industry has famously struggled in the decade of cheap money, stoking persistent concerns that the market has become too efficient for the strategies to work, or that the trades were too crowded.Īccording to Antti Suhonen, senior adviser at the hedge-fund consultancy MJ Hudson, the revival of alternative risk premia strategies might have come too late. Recently, as markets began to lower their expectations for interest rate hikes in light of signs that inflation has peaked, the year's major trends started to reverse, which has had a negative impact on quant returns. It's still too early to say that quant managers are definitely making a comeback. Consistent trading patterns across asset classes have helped to drive this growth. This is according to an index from Societe Generale. He notes that some of the best opportunities have materialized on the short side of fixed-income.Īlternative risk premia strategies have gained nearly 4% this year, taking their rebound since the end of 2020 to 12%. Trend following strategies have been outperforming the market in recent years, while factor-based strategies offer a more systematic approach to investing.Īccording to Razvan Remsing, director of investment solutions at Aspect Capital, the removal of the Fed put during 2022 has resulted in significant directional moves in markets. Trend and factor strategies are both seeing increased interest from investors. Discretionary managers struggled to adapt to the end of cheap money. Meanwhile, trend followers and systematic macro funds saw big swings in asset prices, from equities to Treasuries, as inflation picked up. According to research provider PivotalPath, equity quants posted a 5% return through November, compared to a 1% loss for hedge funds overall. This helped managers who follow rules-based strategies with diversified market exposures, especially those running long and short trades. Meanwhile, value stocks that had been underperforming rebounded. This year, Big Tech shares lost their luster for equity funds as rising interest rates made their lofty valuations look risky. However, while not every fund has thrived in 2022, the end of near-zero rates is proving to be a benefit for many systematic trades. It's difficult to make broad statements about quants, who encompass a wide range of investment styles from factor funds that trade based on rules like how cheap a security looks, to black-box investing that uses artificial intelligence and alternative data. According to Braga, these trends will cause the next ten years to be very different from the last twenty. These themes include inflation, decarbonization, disruption of the supply chain, and the war in Ukraine. This is a far cry from the low-volatility bull market that caused many computer-powered portfolios to come close to collapse.Īs of November 30th, Aspect's returns are at 7% and Lynx's are at 15%.Leda Braga, founder of the $16 billion money manager Systematica Investments, believes that there are some major macro themes that are currently affecting the world. This is a positive sign for investors who have been waiting for a rebound in the markets. Overall, trend followers are on track for their best year in data going back to 2000, while a typical factor portfolio is headed for its biggest annual gain since at least 2008. Man's $11.6 billion AHL Alpha fund is up 10.7% through November, while Aspect's Diversified fund has jumped 37.9% through December 7. This is a perfect environment for a rules-based investment strategy.ĪQR's Absolute Return Strategy has surged by 40.9% through November, and is on track for its best year ever, according to a person familiar with the matter who spoke on condition of anonymity. Macroeconomic volatility is driving powerful one-way price trends, creating new winners and losers as well as widening the performance gap between companies and assets. They are able to take advantage of opportunities and make a lot of money.įamous quant firms like AQR Capital Management, Man Group and Aspect Capital are doing well as inflation-fueled turmoil hurts many of their human counterparts in the stock and bond world. The math wizards of Wall Street are doing extremely well this year, despite the global market conditions.
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