Mutual and hedge funds that use quantitative strategies have fared poorly of late, but rather than blaming their bleak performance on recent market gyrations or a steep and simultaneous sell-off of stocks by hedge funds, many are saying that the resurgence of growth stocks is to blame, The Wall Street Journal reports.
So far this year, quantitative mutual funds are up 3.5%, compared to a 4.5% rise by the Standard & Poor’s 500 Index, according to Lipper.
Analysts say that many quantitative funds hold the same stocks, and when a number of large hedge funds unloaded some of these stocks, it caused a downward spiral in their prices, prompting other hedge funds to also unload their shares. The cyclone then hit quantitative mutual funds.
“Quantitative strategies tend to have a valuation component and a momentum component, and those stocks were hit hard,” said Joel Dickson, head of active quantitative strategies at Vanguard. But the hit that quantitative mutual funds took wasn’t as great because they don’t leverage or short stocks.
Tom Monroe, who manages the Russell Quantitative Equity Fund, blames the difficulty that quantitative funds have been having on the pendulum swinging from value to growth. “It has more to do with factor rotation from value to growth,” he said.