Quant Fund Postponed – Where Are All The Dummies?

Quant Fund

REALLY? It’s hard to know where to begin because you just can’t make this stuff up. Seems the robots and the quant fund “revolution” that was supposed to deliver superior fund performance IS JUST NOT WORKING! A couple of funds have shut down and others are underperforming or having their plugs pulled for a while. WHY? Well like any good analyst or strategist (human type), they all have lots (LOTS OF) excuses and “not my faults”, “markets have it wrong”, etc. but the simple reason? The robots/quants/etc. are all just too smart for their own britches. AND, they are trading/investing against all the other smarties using the same historical data. In other words, they are all so smart, but now there are no dumb people to trade against. Hmmmmm! Who are the real dummies?
(Bill Taylor, CEO)

“For computerized strategies that are supposed to be making people obsolete, quants are looking decidedly human in 2017.

Program-driven hedge funds are stumbling, a promising startup has closed, and once-reliable styles are showing weakening returns. A handful of investment factors, the wiring of smart-beta funds, have gone dormant.

This isn’t just normal volatility confined to a single month, according to Neal Berger, the founder and chief investment officer of Eagle’s View Asset Management, a $500 million fund-of-funds that invests with 30 managers, half of them quants. Returns have been decaying for a year, suggesting the rest of the market has figured out what the robots are doing and started taking evasive action, Berger said.

June was the worst month on record for Berger’s fund, as usually robust strategies lost their footing and the firm fell 2.4 percent. The worst pain has been among quants in the market-neutral equity space, which take long and short positions to isolate bets on price patterns and relationships.

In order to exploit inefficiency, giant firms like Two Sigma Investments LP and Worldquant LLC “need to be dwarfed by large, dumb money,” Berger said by phone. “They’re waiting for the sucker to come to the table, but the suckers are fewer and far between.”

Berger made waves in professional circles last month when he trumpeted the death of certain quantitative tactics in a widely circulated letter. His thesis: Systematic strategies require an endless supply of victims to thrive, and the growth of quant and passive funds has caused dumb money to behave unpredictably or disappear altogether…”

Full Story at Bloomberg