Quants Winning Against Hedge-Fund Peers Get Slammed by Selloff (2025)

Quants Winning Against Hedge-Fund Peers Get Slammed by Selloff

Justina Lee

Tue, Apr 8, 2025, 9:26 AM 4 min read

(Bloomberg) -- The tariff-induced shock unleashed on markets in recent days has been so ferocious that even some of Wall Street’s fastest and most tech-savvy investors have been unable to escape.

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Quantitative trading firms, who for much of this year had been a bright spot amid the institutional-investment crowd, are now showing cracks in the historic turmoil sweeping across assets.

Systematic long-short managers, who use rules-based strategies to bet both on and against securities, dropped on Thursday, Friday and Monday as positions in crowded stocks unwound, according to Goldman Sachs Group Inc.’s prime brokerage. That trimmed the cohort’s 2025 gain to 10%, the bank wrote in a note late Monday.

Meanwhile, the $1.3 billion AQR Style Premia Alternative Fund fell 6.7% in four sessions for its biggest loss since 2023, according to data compiled by Bloomberg. And an index of 10 risk-premia managers from Societe Generale SA posted its worst three-day run in a year through Friday.

It’s not yet enough to drag performance to the level of many hedge-fund peers — Goldman estimates show fundamental long-short managers lost another 1.4% Monday to extend their year-to-date loss to 5.9%, for example. But it marked a turn for a group who, amid the trade-war noise leading up to Donald Trump’s tariff announcements on April 2, had broadly defied the market downturn. Funds run by the likes of Renaissance Technologies LLC, AQR Capital Management and Engineers Gate were among the first quarter’s top performers.

That these hitherto triumphant investors are joining the selloff speaks to the abrupt and idiosyncratic nature of the shock. Many such quants aim to be what’s known as market neutral, meaning they combine long and short positions to inoculate themselves against swings in the overall market. But the plunge across stocks has been so hard and indiscriminate that the impact has been hard to parse with their systematic models.

Amadeo Alentorn says his risk models at Jupiter Asset Management showed US markets swinging to a pessimistic and highly uncertain regime so quickly that his system had little time to switch to stock-picking signals with a better chance of success.

“Typically a move like this would have taken a number of weeks,” said Alentorn, who co-manages a $3.5 billion quant market-neutral fund. “If you were positioned for something else a few weeks ago and suddenly you were hit by this, then there’s a period of readjustment for some quant models.”