Europe Quant Funds May Have Tumbled in November, JPMorgan Says

Discussion in 'Wall St. News' started by ASusilovic, Nov 23, 2007.

  1. Nov. 23 (Bloomberg) -- Some European quantitative funds may have lost 15 percent this month following declines in equity markets, according to strategists at JPMorgan Chase & Co.

    ``We expect some long-only quant managers, regardless of their strategies, to be down at least 10-15 percent for the month,'' Marco Dion and Matthew Burgess, analysts in JPMorgan in London, wrote in a report today. ``Quant bloodbath ? again.''

    Quantitative managers, who use mathematical strategies to make investments, were blamed by some investors for a sell-off that wiped out almost $400 billion in value from the Dow Jones Industrial Average in the U.S. from July 19 through Aug. 16. Funds were forced to sell because many owned the same holdings and ran similar computer models that were equally jarred by widening credit spreads and increasing stock-price volatility.

    Europe's Dow Jones Stoxx 600 Index has dropped 8.1 percent so far in November, headed for the biggest monthly decline since 2002.
  2. November was an EXACT replay of August.

    Anyone who repeated their August mistakes in November...
    Has a learning disability... and should get out of the business.

    Anyone who's been trading for > 10 years...
    Has seen very similar events at least 7-8 times...
    And should have cleaned up in August and November.

    Luck has NOTHING to do with it.

    Because exploiting major selloffs requires expert human judgement...
    And often counter-intuitive strategies on a temporary basis...
    Stupidly LOCKING into quantitative strategies in times like these is suicidal.

    Adapt and evolve... or die, quant, die.
  3. Very wrong. On a stock by stock level it was completely different. I doubt we will see any fallout from L/S equity quant funds. All the mid-month NAV I see in funds I am invested in looks flat to very slightly down for the month. Nowhere close to August.

    JPMorgan is talking about long-only managers. It's only natural they're in trouble with the markets tanking. This bears no similarity with the mass unwinding of leverage in market neutral funds that saw individual stocks up and down 8% for those 3 nutty days in the first week of August.
  4. At this rate, they might recover their losses by the end of the month with that two-times leverage.