Quantitative Investment Management recorded double-digit losses in its stock trading strategy last month, adding to the fund’s steep drawdown this year.
The Quantitative Tactical Aggressive Fund declined an estimated 11.80% in September, extending losses to 45.93% for the year, according to Absolute Return data. The fund ranked as one of the top-performing billion-dollar hedge funds last year after returning more than 60%.
The stock trading strategy managed less than $650 million at the end of last month, down from as much as $1.2 billion last year. QIM’s more than $2 billion futures-trading strategy made slight gains in September, bringing performance losses to 3.22% this year.
QIM did not immediately respond to requests for comment.
Led by the self-taught quant Jaffray Woodriff, QIM uses statistical learning signals to trade more than 1,000 global stocks and futures contracts. Those programs produced annual returns of more than 20% for the Quantitative Tactical Aggressive fund through last year.
But in February this year, a stock market correction upended the fund’s models, resulting in losses of almost 25% for the month. The decline marked the fund’s largest ever one-month loss since it began trading in 2008.
The fund regained a small portion of the losses in March before entering a five-month streak of negative performance. Trading in May brought double-digit losses of 11.61% for the fund, according to Absolute Return data.
Last year, Quantitative Tactical Aggressive profited from low market volatility and increased dispersion between individual stocks, which helped increase the number of positions it holds. The fund also expanded its use of leverage, borrowing up to nine dollars for every one invested.
That amount of leverage, however, can lead to sharp performance swings when conditions reverse. QIM’s funds operate with little daily human input, and Woodriff rarely decides to overrule his investment systems.
Quantitative equity hedge funds have made mixed performance this year. In a third quarter letter to investors, Balyasny Asset Management said the firm’s systematic strategies made small losses “during a difficult summer period for quant investing,” according to a copy viewed by Absolute Return.
Renaissance Technologies’ largest strategy, the Renaissance Institutional Equities Fund, returned 7.72% for the year through August after suffering losses early in the year, according to Absolute Return data. Updated performance was not immediately available.
Misha Malyshev’s Teza Capital Management was down more than 15% in its main fund through July, according to performance data viewed by Absolute Return. The firm recently received capital from the multistrategy giant Millennium Management.
QIM expands stock trading hole on Absolute Return.