Quant funds having a bad year in 2017. Trend-followers may not survive

H

helpme_please

Many of the quant funds mentioned in this Bloomberg article are into equities. Why is it so hard for them to make money in a bullish year? Hasn't it been said that a rising tide lift all boats? Shouldn't even idiots perform well in 2017? Why can't these geniuses do much better? Lazy "idiots" who invested in passive index funds/etfs have outperformed these geniuses.

Even the Clinton Group which had a positive year in terrible 2008 lost 5.5% in bullish 2017. Huh?

According to the article, popular techniques like trend-following or factor-investing will not survive. I guess trend-followers had better take note.

https://www.bloomberg.com/news/arti...ostponed-as-quant-funds-flattened-in-equities

“The vast majority are not having a good year,” Fred Branovan, president and chief operating officer at family office FFC Capital Corp, said by phone. “Market neutral funds need volatility to do well, and the daily increases in the equity markets make it very hard to short in this environment.”

There are also travails Clinton Group Inc., a quantitative hedge fund that manages more than $2.9 billion and hadn’t posted a down year since launching in 2006. The New York-based fund ended slightly down last year and has slumped about 5.5 percent in 2017, according to a person familiar who asked not to be identified.

According to Berger, the world is moving to a situation where “pedestrian” quant strategies like trend-following or factor investing won’t survive.
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helpme_please said:
Many of the quant funds mentioned in this Bloomberg article are into equities. Why is it so hard for them to make money in a bullish year? Hasn't it been said that a rising tide lift all boats? Shouldn't even idiots perform well in 2017? Why can't these geniuses do much better? Lazy "idiots" who invested in passive index funds/etfs have outperformed these geniuses.

Even the Clinton Group which had a positive year in terrible 2008 lost 5.5% in bullish 2017. Huh?

According to the article, popular techniques like trend-following or factor-investing will not survive. I guess trend-followers had better take note.

https://www.bloomberg.com/news/arti...ostponed-as-quant-funds-flattened-in-equities
More...

Clinton Group is doing statistical arbitrage, which has nothing to do with whether the market goes up or down.

Trend followers have a small component that is "the S&P 500", but most of them trade between 100 and 300 markets.

As you said it well, anyone can buy an ETF, that's why quant funds are paid to do something else: uncorrelated returns.
 
helpme_please said:
Shouldn't even idiots perform well in 2017?
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idiots did perform well this year

helpme_please said:
Why can't these geniuses do much better?
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because the geniuses not idiots - they have a method

helpme_please said:
Why is it so hard for them to make money in a bullish year?
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for the people with the method it does not matter bullish or bearish market, what matters is if their methods work or not

apparently the geniuses from the walls street have the methods not sophisticated enough: those methods somehow do not work in current environment....

it does not matter: those geniuses still make money whether their methods work or nor - they got their fees :) ...

that's the beauty of the wall street - they make money in any environment, and whether their methods work or not

the idiots from the mains street will eventually loose, because the bear market will take all their profits back from them

helpme_please said:
According to the article, popular techniques like trend-following or factor-investing will not survive
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baloney

the article (i did not even want read it) is written by the genius from the wall street probably :)
 
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helpme_please said:
Many of the quant funds mentioned in this Bloomberg article are into equities. Why is it so hard for them to make money in a bullish year? Hasn't it been said that a rising tide lift all boats? Shouldn't even idiots perform well in 2017? Why can't these geniuses do much better? Lazy "idiots" who invested in passive index funds/etfs have outperformed these geniuses.

Even the Clinton Group which had a positive year in terrible 2008 lost 5.5% in bullish 2017. Huh?

According to the article, popular techniques like trend-following or factor-investing will not survive. I guess trend-followers had better take note.

https://www.bloomberg.com/news/arti...ostponed-as-quant-funds-flattened-in-equities
More...

The answer is simple.

Their bias(s) have been wrong. (Happens even to the big boys...)
 
Scataphagos said:
The answer is simple.

Their bias(s) have been wrong. (Happens even to the big boys...)
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If it happens to one or two, it's understandable. But it seems to happen to too many at the same time. Something is wrong fundamentally with their investment strategy. Or something has fundamentally changed in the market that caused their strategy to fail.
 
helpme_please said:
If it happens to one or two, it's understandable. But it seems to happen to too many at the same time. Something is wrong fundamentally with their investment strategy. Or something has fundamentally changed in the market that caused their strategy to fail.
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The markets have not "fundamentally changed"... it's just their nature. All you have to do to get "knocked on your ass", is to keep doing what you used to do that was successful. (The hedge fund guys can be sheep, too.)

The market is all about "adapt or perish". (Yes, right now we have a new paradigm of "Fed intervention"... but that's temporary.) The markets are still "greed and fear".
 
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Since the beginning of time...Every trader has been having a bad year o_O -- and if someone reports a good year...they are simply just merely lucky,
 
Any investment or trading strategy that I had ever come across, had at some point experienced periods of poor performance.

To gauge whether a particular strategy is still valid, the only thing that we can do is to look back at its historical performance. And as long as historical performance show that such periods have occurred in the past, then it is perfectly normal for it to happen again.

I use a trend following trading strategy, and the drawdowns that such strategies are currently experiencing seem perfectly normal. It must be a difficult time for trend following funds as redemptions continue, but I also see a great opportunity for new trend followers like me to fully capitalise on the rebound.

If I am wrong then trend following probably will probably die together with my account.
But if I am right about trend following, then I might really outperform because I get to start at a really good time. Exciting times.
 
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