In 2008, the financial crisis broke out, many U.S. fund managers are still vivid memories, although some funds to restore the net obviously, but many at the bottom of the struggle. This includes the use of quantitative models that quantify the investment fund. The so-called quantitative fund, is calculated by the model number to find investment opportunities, and as a final investment decision for asset management. Such funds are also commonly referred to as purely quantitative operation Fund, the middle and no one operation; another type of subjective judgments been integrated fund managers, that is calculated in the program by the fund manager to join a subjective judgments, the last to make investment decisions. No matter what kind of quantitative funds, the number of models are the core of these funds. The model is able to truly grasp the investment opportunities, and where the market is particularly important effective.

In fact, many quantitative funds between 2007 to 2010 is not smooth. Such as the use of quantitative models of the seven unique Bridgeway Fund, as of July 28, 2010, in the past 3 years in their respective categories in the performance of the fund on the list. Similar situation prevailed in the eight quantitative fund Goldman Sachs. JP Morgan’s Intrepid and Pioneer’s quantitative group also performed poorly. On average, Morningstar fund analyst at the U.S. track 65 quantify the average fund performance over the past 3 years in similar position in their respective post-1 / 4.

Only the poor performance of many quantitative funds

Many quantitative funds use the mathematical model is to consider the value of investment products, economy, quality and other factors. It is precisely these factors lead to endure a number of quantitative funds in the market recently with two ears, considering the value of factor models bear the brunt. In October 2007 to March 2009 between the value of the use of quantitative models is the market share held by the Fund’s leading the way lower down. Vanguard Group’s long-term quantitative equity managers and investors said Sandip Bhagat, then the value of the signal are all investors depressed, but value is what a number of quantitative models of the core. In addition, many emphasized that the quantitative trend of earnings or stock prices following the fund was still up years of investment products has continued to do more, such as energy and other cyclical stocks strong, but it is these stocks badly hit in 2008.

After 2008, many quantitative funds according to their model to select those able to withstand the market turned down, a robust stock. These companies generally have a more solid balance sheet and profitability. Unfortunately, just select the quantitative fund market in early 2009 made the decision reversed. At this point investors began to chase strong cyclical, β value of the stock higher. Chasing trends and to quantify the fund on the right side of trading the stock market reversal missed the “first taste of the soup,” because the model needs to determine the trend has been the formation of the signal will change in investment strategy.

Shocks in the city in 2010 to quantify the performance of different funds. For example, 1 Bridgeway aggressive investors in a bear market fund fell 64%, in the same kind of near the bottom, while lagging behind in the market rose in the same average. Bottom of the fund again in 2010. Although the fund since 1994 as a whole performed well, but the past 5 years as of the end of this year’s 7-year yield losses of 6%, behind similar funds.

Quantify the disappointing performance of the Fund has affected the business. Bridgeway’s funds at the end of 2006 there were 31 billion in assets. Since then, the cumulative outflow of funds more than 800 million U.S. dollars, together with investment losses, as at the end of this year’s six assets of the Fund has fallen to 1.4 billion U.S. dollars. In addition, the United States a larger quantitative fund Vanguard Strategic Equity Fund since 2006 has lost 2.3 billion U.S. dollars, now is the time scale of only 1 / 3. Management Bogle Small Cap Growth Fund’s John Bogle Jr. Also witnessed from the Fund to reduce the size of three billion U.S. dollars to 6 billion.

Now how to do?

Quantify the performance is difficult to say when it will pick up. Some people think that if they do not change quantitative fund investment in the future will have to face many difficulties. Goldman Sachs Asset Management is now Senior Advisor Robert Quantitative Jones said that as more and more investors join the quantitative, quantitative model of the value of discovery and Prosperity on the effectiveness of the signal is disappearing. He called quantitative fund managers should be used only by a few people to use some of the data source for the quantitative model to include more unique factors, thereby strengthening the validity of the model. However, some investors are skeptical quantify, such as Vanguard Group, Bhagat that quantitative managers do need to introduce more unique factor, but he questioned how many of these new factors.

However, some people think that the current quantization is only temporary losing ground. Some quantitative fund managers, such as Bridgeway founder John Montgomery – that quantitative funds performance last year, after the market hit bottom of the main reasons behind the stock price is to reflect the following macroeconomic news, and not based on improved corporate profits, but trend is not sustainable. Indeed, the recent focus on Bridgeway’s many fund allocation to improve the ability of the company stock profits exceeded expectations, but the performance of these funds is still lagging behind the performance benchmarks. Sometimes, despite the work of Bridgeway fund managers have done a good job but still recorded a relatively poor returns. In fact, even some of the fundamentals of stock selection using a similar method to send the same problems encountered by fund managers. For example, look for quarterly earnings exceeded market expectations although the stock of the Brandywine Fund, a long-term performance is good, but the last 3 years are plagued by performance.

In addition, we are modeling a similar factor, leading to decreased effectiveness model. The present situation may change, because the total size and number of quantitative funds than the previous decrease. For example, Bogle Jr. Tracking a group of quantitative management of the Fund for the 400 billion U.S. dollars the original size, but liquidation, capital outflow, the scale of investment losses and other causes fell 260 billion U.S. dollars. Aronson believes large numbers of quantitative investors in 2007 have left the market, which to leave more room for new entrants.

Fortunately, despite the loss of all quantitative funds, their staff is very stable. Bhagat Morgan Stanley to leave before the vanguard, but as Bridgeway and Bogle did not occur during this time staff wastage. In fact, Bridgeway also added a few academics and engineers to strengthen the research capabilities.

Meanwhile, Bridgeway will complete its quantitative model 17 update.

Goldman Sachs Quantitative Group also says that it will adjust its quantitative model. In fact, the model is not improved only recently started, most of the quantitative fund managers will continue to research through the discovery of new factors, and model to be improved.

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