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Quant hedge funds log worst momentum day in over two years
Systematic long-short funds were down about 1.4% by early afternoon Wednesday, while a Goldman global momentum index moved well outside its typical historical range.
Quantitative hedge funds posted their sharpest daily decline in more than two years on Wednesday as rapid market rotations battered momentum and other factor driven strategies, according to Hedgeweek, citing a Financial Times report.
The article says a Goldman Sachs note circulated to clients put systematic long-short funds down about 1.4% by early afternoon Wednesday, marking their worst daily performance in over two years. It also points to Goldman’s global momentum index moving beyond its normal historical range, with momentum strategies particularly vulnerable as markets switched quickly between winners and losers.
Morgan Stanley also highlighted the magnitude of the drop, saying it was the first time in at least five years that its pure momentum index fell more than 4% on a day when the broader S&P 500 was rising. The report links the difficult environment to abrupt moves across markets, noting systematic strategies can be forced to adjust positions when trends reverse quickly.
Hedgeweek adds that volatility coincided with US Treasury plans to at least double purchases of longer dated government debt to help stabilize the Treasury market. It also notes Moderna shares surged after positive trial results for an experimental skin cancer treatment, and says Goldman estimated systematic long-short funds were still up about 1.7% for August at the time of its analysis.
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