Hedge fund strategies: Don’t shoot the quant guys!
Quantitative investment strategies are valid, says report.
"There are good reasons for all investors to be adopting certain types of quant tools in their work. I think sadly a lot of people walked away from this with a more limited version of what quant firms do"
The apparent free fall of the some of the world’s most respected quant shops in August has tarnished a whole section of the hedge fund industry. But is quant as an investment strategy to blame? A recent theory put to the industry by MIT’s Andrew Lo and Amir Khandani is that the quantitative nature of the losing strategies’ significant losses experienced during the week of August 6 was purely incidental.
On August 7, 8 and 9, long/short equity market neutral strategies, or statistical arbitrage strategies, seemed to fall through the floor. Renaissance Technologies, AQR, BGI’s 32 Capital Fund, Black Mesa Capital and Highbridge, to name but a few large quant players, were all hit hard and reported to investors significant losses over the period. By the end of that week, most were down 7% on the month from those three days, some by as much as 18%.