Systematic or quantitative hedge funds have experienced losses every day since October began, according to a Goldman Sachs client note. As of Monday, these funds were down around 1.8% for the month, marking one of the worst four-day trading returns in almost two years.
The losses are attributed to crowded trades and a technical deleveraging event, rather than changes in company fundamentals or economic data. Funds following algorithmic signals rushed to exit positions simultaneously, pushing markets against them.
Bruno Schneller, Managing Director at Erlen Capital Management, noted: “This is a textbook example of a multi-layered quantitative fund unwind. The market’s own plumbing seized up.”
Despite these short-term losses, systematic hedge funds are still up approximately 11% year-to-date, even as Nasdaq and S&P indexes reached record levels, showing resilience amid ongoing market volatility.