The year 2016 hasn’t been especially kind to hedge funds. But it’s been kinder to some than to others. On one end of the spectrum we find Bill Ackman and Pershing Square Asset Management. On the other, Quantedge Capital. The Singapore-based risk premium fund is up 40% this year, thanks to its strong stomach.
Quantedge, by comparison, maintains a common measure of risk known as annualized volatility at a constant and abnormally high level of 30%, two to three times that sought by similar hedge funds, according to investors.
That produces a higher chance for the fund to notch above-average gains. It also raises the likelihood of a big loss, and some investors say that the risk of investing in a high-volatility fund like Quantedge is that losses get so high that an investor pulls out of the fund at a big loss….
“To our longtime investors, who have been through a few up-and-down cycles with us, you know this is business as usual,” it wrote. “…Our investment model delivers high returns over time, at the cost of unpleasant bumps along the way.”