In short, 2012 will be a field day for those new behavior model quant funds.
"On average quant funds seem to perform about average, " says Jeffrey Tjornehoj, research manager at Lipper.
With their models telling them to drive off cliffs, many quant funds crashed last year.
These are among several quant funds available to the masses (see table, p. 228).
However, that selling pressure caused other quant funds to lose money as their favoured stocks fell in price.
ECONOMIST: The peril for markets when computers miscalculate
In counting cards, as with most quant funds, the idea is to use a mathematical system to do just a little bit better than chance.
Bridgeway Capital Management's Aggressive Investors 1 and Aggressive Investors 2, among some of the oldest quant funds, returned an annualized 18% and 20%, respectively, in the decade through March 2008.
Dan Mathisson, Credit Suisse managing director and head of advanced execution services, believes these massive orders were from quant hedge funds whose algorithms suddenly decided stocks were cheap and sent out huge buy orders, all over 1 million shares each.
This kind of record trading volume plus volatility can only have been the result of extraordinary high frequency trading by computer and the quant hedge funds, going in and out of Apple and IBM and big bank shares dozens of times a day.
FORBES: The Battered Investment Class Has No Confidence in Markets, Companies, Banks, Governments
While some hedge funds are long-only and others are long-short, OpenGamma has developed software for very quant-driven funds whose strategies use the application of risk to drive their returns, added Wylie.
You have, say, two pension funds, customers of two different quant managers, duking it out inside a computer.
Last week, the black box investors at Boston quant fund ClearStream Investments said the big emerging market exchange traded funds were all a buy.
Boston boutique quant shop ClearStream Investments rotated out of its preferred equity exchange traded funds after market close last Wednesday and move into cash.
The wizard inside the black box over at Boston quant shop ClearStream Investments has opted in to emerging market exchange traded funds after being cash only for nearly a month.
Boston-based quant shop, ClearStream Investments, says the top four BRIC exchange traded funds are duds short-term.
FORBES: BRIC ETFs Unattractive, Says ClearStream Investments "Black Box"
But as of market close on Wednesday, the quant fund is recommending clients buy all the big four EM exchange traded funds and then some.
FORBES: Emerging Markets Back On The Buy List...But For How Long?
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