Consistent trading patterns from currencies to bonds also helped alternative risk premia strategies—factors across asset classes—gain nearly 4% this year, taking its rebound since end-2020 to 12%, a Societe Generale index shows.
It’s still too early to claim that quant managers are roaring back for good. Recently, as markets dialed back expectations for rate hikes on signs that inflation has peaked, this year’s big trends started to reverse, undercutting quant returns.
More broadly, the industry famously struggled in the decade of cheap money, stoking persistent concerns that the market has become too efficient for the strategies to work, or that the trades were too crowded.
The revival might have come too late, says Antti Suhonen, senior adviser at the hedge-fund consultancy MJ Hudson. He estimates total assets of alternative risk premia strategies, for instance, have dropped as much as 50% since his $200 billion estimate at the end of 2019.
“A lot of people have just given up,” Suhonen said, referring to clients. “They’re like: It’s not on my agenda because it hasn’t worked for the last 10 years and yes, this year has been good, but is it just a flash in the pan?”
Managed-futures funds—which include trend followers—have drawn $8.7 billion this year after a $13 billion haul in 2021, eVestment data show. Yet fund liquidations still exceeded launches this year—which has been the case for every year since 2015, according to figures from Preqin.
The pitch now is that markets are set to remain volatile in the era of a hawkish Federal Reserve. For quants that say their diversified investing methods offer an alternative to traditional strategies like the 60/40 portfolio, gains this year are making that an easier sell.
“Allocators will need to rethink their allocation,” said Braga at Systematica. “They’ll have to rely on uncorrelated strategies much more. The idea that you can have a 60/40 as a solid baseline is gone forever.”
This article was provided by Bloomberg News.