Quants Poised For Worst Month Since 2007

Oct 30 2012 | 10:19am ET

Quantitative hedge funds are about to post their worst monthly performance since 2007, thanks to an unfortunate confluence of bad bets.

Managed futures and commodity trading advisors attempt, through complicated algorithms, to spot and exploit market trends—but this month, many of these trends have turned against them.

According to the Newedge CTA Trend Sub-Index, the average fund was down 5.63% this month as of October 25. If nothing changes in the next few days, they will turn in their worst monthly performance since August 2007 (although year-to-date, the average CTA is flat).

Alex Greyserman, chief investment officers of the $900 million ISAM fund, which is down about 5% month to date, told Reuters there was no single macro factor to blame:

"Statistically these things can happen, but they shouldn't happen very often. It's just been one of those months when the trades went against you everywhere for a number of reasons."

Even the leading lights in the quant world are struggling—$29 billion Winton Capital is down 6.5% YTD as of October 26 and Man Group's $16.3 billion flagship AHL fund is down 4% YTD. Another giant, BlueCrest Capital has gone so far as to revamp the programs it uses to trade one of its computer funds.


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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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