Quants taking a beating: Renaissance down 9% already this month
A friend sent me this article – it gives more evidence to Bo Yoder’s theory that this crazy market is due to the computers battling it out:
James Simons’s $29 billion Renaissance Institutional Equities Fund has fallen 8.7 percent so far in August as his computer models used to buy and sell stocks were overwhelmed by securities’ price swings.
…Simons said other hedge funds have been forced to sell positions, short-circuiting statistical models based on the relationships among securities.“We have been caught in what appears to be a large wave of de-leveraging on the part of quantitative long/short hedge funds,” the 69-year-old Simons said in a letter to investors.
“One kind of market condition that these strategies will not do well in is the kind of market swings that we’ve seen over the last few weeks,” said Andrew Lo, a finance professor at the MIT Sloan School of Management and founder of hedge-fund firm AlphaSimplex Group LLC, also in Cambridge.
New York-based Tykhe Capital, which has $1.8 billion in assets, told investors that performance of its various share classes with some quantitative strategies range from minus 17 percent to minus 31 percent in the month through yesterday.
Update: from dealbreaker:
“The trading volumes are going thru roof, to the point that the program trading desks servers are crashing,â€? one reader writes. “For what it’s worth, I think it’s part of the unwinding of leverage from June and July. A number of multi-strategy shops are looking at losses and can’t even get a bid on certain swaps, fixed income and derivatives. So, what’s a risk manager/CIO going to do? Sell the most liquid part of their book.â€?
