CNBC found data that says investors have pulled 61% of the money they had invested in quant funds since 2007 and 1/4 of all quant funds have closed since that year.
They had a segment yesterday with two quants to dissect the data. The conclusion: the industry should be fine. It can ride on its reputation for being smarter than everyone else!
The video kicks off with quant manager of Able Alpha Trading, Irene Aldridge, who brushed the data off – saying the results might really be because people are confused.
Quant funds’ strategies are hard to understand, she says, and the funds usually update them about every 6 months. So maybe skittish, uncertain investors didn’t like the most recent 1/2 year’s strategies.
(Another reason for the mass withdrawal might be that quants notoriously missed out on last year’s market rally.)
Then CNBC’s other guest, Maggie Stump of Quantitative Management Associates, points out that the industry will be fine, if only because quants have a reputation for being smarter.
What you do when you invest with a quant fund is invest with a bunch of smart folks.
It’s crude, but it sounds reasonable enough. She thinks funds’ re-tooling their strategies have little to do with the withdrawals and that the withdrawals just mean we’ll see a leaner, better quant market.
Aldridge would seem to agree, because she backs up that argument with some data.
If we look at actual statistics of how quant funds have done in 2010 YTD, many have out-performed non-quant funds.
Aldridge thinks quant funds will rage back into favour once people take a look at the performance.
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