Hedge fund Schonfeld hit as investors slash risk
NY-based computer-driven hedge fund manager suffers double-digit losses this year
Schonfeld Strategic Advisors, a prominent computer-driven hedge fund manager, has recorded double-digit losses this year, as hedge funds across the board are hit by a scramble to cut risk amid tumbling markets and the coronavirus pandemic.
The New York-based manager, which is one of the largest and fastest-growing computer-driven hedge funds in the US, manages a roughly $35bn portfolio of trades betting on rising and falling prices in equities and other assets. Its Partners fund has lost approximately 15 per cent this year, and part of those losses have come in recent days, said people familiar with its performance.
Schonfeld declined to comment.
The firm was founded by trader Steven Schonfeld as a family office before it converted into a hedge fund manager running external investors’ capital about four years ago. It is a large player in the so-called statistical arbitrage space. ‘Stat arb’ funds use computer algorithms to scour markets for tiny mispricings in shares to exploit. They borrow to magnify their positions in an attempt to boost returns.
The fund has delivered annualised returns of nearly 20 per cent since its launch. However, in recent days it has, like many hedge funds, been hit as some of the biggest managers try to slash risk in order to limit losses in slumping markets. It has cut its own risk levels, said a person familiar with its positioning.
Hedge fund “deleveraging is now accelerating,” wrote Morgan Stanley in a recent note to clients. “The bears are in total control of a market paralysed by its inability to decipher the true economic impact of the virus.”
Like firms such as Millennium Management and Citadel, Schonfeld employs a range of trading teams to wager on different areas of the market. Its Partners fund also includes non-quant strategies that take bets on corporate events such as mergers and acquisitions.
The firm, which opened an office in London’s St James’s in late 2018, has been aggressively adding portfolio managers as its asset base has expanded. Two years ago, when it was running a portfolio of more than $20bn, it took over investment firm Folger Hill Asset Management.
Schonfeld also runs a non-quant fund, called the Fundamental Equity fund, which has suffered small losses, said a person who had seen the numbers.
The FT reported earlier on Thursday that Millennium, a $40bn multi-strategy firm, has closed a double-digit number of its “trading pods” in response to performance losses.