Remember the good old days, when all you needed to succeed in stock-picking was a team of math geeks and programmers able to code a quantitative trading algorithm capable of distilling vast stores of data into unique and actionable insights so subtle and advanced that no single human could possibly conceive of them? It was a simpler time. Now it has passed.
Even as the Larry Finks of the world begin to embrace the cybernetic future of equity fund management, the stars of the field have begun to dim. That's the story according to aSociété Générale survey of quant funds obtained by Institutional Investor, which found that the average systematic fund rose just 0.04 percent in January and February, after falling 1.07 percent in 2016.
Though we don't have access to the full report, the data published by II do seem to align with the notion that the early quantitative spoils have been gobbled up already, leaving only a diminishing pool of alpha to be fought over by a growing number of thirsty quants. See especially the fortunes of those early adopters – Bridgewater, Man Group – turning sharply downward in the past year or so.
Fund (Launch date)
Annualized since inception
Bridgewater Pure Alpha (1991)
Man Group AHL Alpha (1994)
Winton Futures Fund (1997)
Quantitative Investment Management (2001)
Tudor Momentum Diversified Portfolio (2008)
AQR Managed Futures Strategy I (2009)
Obviously there's still some hope out there (we're looking at you, QIM), but it looks like a tough grind ahead for those quant teams at BlackRock and elsewhere just getting into the game. But you gotta go where the action is. Even if it's a pretty crowded party as is, all those cute institutional investors said they'd be there, so what other choice does one have?
Suffice to say, whoever's the last to leave, please turn the lights off on your way out.
Red-Hot Quant Funds Cool Off [Institutional Investor]