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Quant Hedge Funds Also Hit by US Bonds Sell-off

The recent sell-off in US bond markets due to Fed’s statement on a possible QE exit had made some of the world’s biggest quant hedge funds (also known as CTAs), which use computer models to spot and ride market trends automatically, to suffer steep losses in the past two weeks.  The steep loss is the result of bond yields risen from their lowest levels in decade in the past fortnight and large holdings in those bond position.  Although CTAs are known to be volatile, the losses are still among the highest reported to investors in years.

Here are some of the quant hedge funds’ performance:

  1. AHL, the $16 bn flagship fund of Man Group, the world’s second-largest hedge fund, lost more than 10% of its net asset value in the past two weeks alone.
  2. Aspect Capital, another large European CTA, lost 6.4% for the month.
  3. Geneva-based BlueTrend, the quant division of BlueCrest Capital run by Leda Braga, was down 4.4% for the month as of May 24.  The fund has yet to reveal losses incurred last week, however, as BlueTrend runs a more volatile version of the same strategy as Man, the loss is likely to be significant.
  4. Graham Capital, the US’s largest CTA, was down 3.9% for the month.
  5. Holland-based Transtrend was down 3.1%.
  6. Winton, the world’s largest quant fund, managed to sidestep the worst of the losses.  The fund dropped 2.5% in May, but is still up 6.5% for the year.  Accordingly, all of Winton’s losses were attributable to US bond market moves.  However, unlike its peers, Winton has moved to diversify its algorithmic trading programmes into cash equities and away from its traditional focus in futures contracts and the fund also operates with lower leverage than many of its rivals.


Financial Times, Sam Jones, 2013-06-05, “Quant Hedge Funds Hit by US Bonds Sell-Off”