Hedge funds that use powerful computers to run their portfolios are making huge profits in this year’s market turmoil, marking a resurgence for a sector trying to recover from a long stretch of weak performance.
Trend-following hedge funds, which use mathematical models to try to predict market movements, had struggled for years as central bank bond-buying suppressed much of the volatility on which they thrive.
But the $337bn industry is now making its biggest gains since the 2008 financial crisis, according to data provider HFR.
These quantitative funds have profited in particular from bets against government bonds, which have been shaken by expectations that the Federal Reserve will keep raising interest rates aggressively to fight high inflation. They have also capitalised on a surge in energy and commodity prices, fuelled by supply chain bottlenecks and Russia’s invasion of Ukraine.
“Now is one of those 2008 moments where everyone [in trend-following] is doing well again. The trends are clearer”, said Leda Braga, founder of Systematica Investments and former head of systematic trading at BlueCrest.