From FT Alphaville:
Are we about to experience a rerun of the summer’s pain for quant funds?
Rumours abound. Dealbreaker was last week on the trail of a mystery Boston-based fund, said to be liquidating positions. By the end of the week, Reuters was relaying that prominent funds had failed to navigate profitably the choppy markets, with the average fund down 3 per cent. Were the quants struggling again?
It might be an easy market in which to lose money, but the consensus seems to be that we’re not seeing the kind of orchestrated quant melt-down that occurred in August.
MSCI Barra have crunched some numbers on the dismal start to the year for European markets. The falls on January 21st, last Monday, were greater than any other one-day fall during previous crises over the last 10 years - an extremely broad-based event, affecting all countries, sectors, size segmenets and style segments, all more or less to the same degree. Only 10 of the 622 index constituents of the MSCI Europe index ended the day in positive territory.
In this way, the sell-off last Monday was similar in character to that on 16th August, as markets globally tumbled. The problems which hit quants funds earlier that month, says MSCI Barra, were narrower, picking off just specific style factors....MORE