![]() “When markets shift dramatically, volatility spikes almost instantaneously – quant funds do less well in whipsaw markets,” says Jackson. They were positioned in a certain way, for certain trends, and then the pandemic threw a wrench into those environments. “Initially, I think quant hedge funds were caught on the wrong side of Covid-19. Quant hedge funds hit a bump at the turn of 2020 when the pandemic struck, but have since recovered and grown steadily in popularity. Motivations behind this include increased transparency, as well as good returns. SigTech’s data also shows that 48 per cent of managers expected investors to increase their allocation slightly, and 18 per cent expected this increase to be “dramatic”. So, some clients will be in the quant space because of increased diversification,” says Jackson.īut research shows that diversification isn’t the only reason for increased allocation to quant strategies. “Broadly, clients are looking for more diversification in their portfolio, which will probably lead them to hedge funds and within hedge funds, systematic approaches. The Russia-Ukraine war leaves quant hedge funds primed for strong performance in the coming months. Mercer principal John Jackson believes the “opportunity is ripe” for hedge funds, including quants, observing how quant hedge funds typically perform well in “higher levels of sustained volatility” and when markets are trending or consistent. The latest research from SigTech shows that 22 per cent of the world’s hedge funds use purely quantitative investment processes, with roughly 2 per cent saying that they also use AI. Industry data indicates one in five hedge funds now apply quant investment processes.
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