The quant quandary

Wed Jan 30, 2008

As model-driven funds melt down and investors flee, portfolio managers struggle to respond

By Julie Dalla-Costa

Like many quantitative funds, Black Mesa Capital sustained a big loss last August, ending the month down 10.7%. A careful recalibration of its model enabled the Santa Fe, N.M., firm to stage an impressive recovery, ending the year up 12.6%. But Black Mesa is proving to be an anomaly among peers.

By December 31, many marquee quant names found themselves facing double-digit losses, including Goldman Sachs Asset Management's Global Alpha (-38%) and Global Equity Opportunities (-30% through November 30), AQR Capital Management's Absolute Return Fund (-11.1%) and Highbridge Capital Management's Statistical Opportunities Fund (-14%). Even the highly revered Renaissance Technologies flopped, at least with its Renaissance Institutional Equities Fund, whose Series A shares were off 1.7%.

Since August, jittery investors have pulled billions of dollars from quant funds, notably...


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