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Quant funds specializing in momentum trading have faced significant losses as their bets backfired. These fast-money quants, which typically chase the hottest trades on Wall Street, were hit hard by a cross-asset reversal. Many funds lost between half to three-quarters of their gains within weeks. Portfolio managers had been adding risk throughout the year, but their bullish stance in mid-July coincided with a near-term high for the S&P 500, similar to July 2023. The downside convexity in Commodity Trading Advisors (CTAs) is now fully in effect, impacting QQQ CTA.
According to Bloomberg, quant funds specializing in momentum trading suffered significant losses. Many funds lost half to three-quarters of their gains in weeks due to a cross-asset reversal. The downside convexity in CTAs we discussed is now in full effect. QQQ CTA 👇 https://t.co/LDCVV4RWqM
Quant funds that chase the hottest trades on Wall Street are getting thrashed as momentum bets backfire all at once. Going into July, trend followers were positioned for the year’s big trades to keep gathering momentum: They were plowing into stocks, betting against… https://t.co/aKd8z90fwx
"Portfolio managers have been adding risk most of this year, but got a bit too bullish in mid-July, just as they had in July 2023. Both Julys ended up being near term highs for the S&P 500." @DataTrekMB https://t.co/bXaEMxvDwY
