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June 3, 2020 10:02 pm

$350M 'Quant Fund' Played the Stock Market Using Real-Time Data -- Then 2020 Happened

An anonymous reader quotes a report from The Next Web: Coatue's $350 million data-driven 'quant fund' made a swift exit from the market in early April -- having realized the coronavirus pandemic had rendered its algorithm unreliable, Business Insider reports. The tech-focused fund, launched by billionaire Philippe Laffont just over one year ago, joins a growing list of "quant funds" to have failed to turn a profit due to 2020's unpredictable nature. Quant funds use complex algorithms to find hidden trade signals in a hyperconnected web of data. While Coatue's quant fund mixes old-school stock picking with quantitative analysis (a method dubbed "quantamental"), execs were reportedly concerned that data farmed in the midst of COVID-19 would confuse its in-house trading program. One example cited by Business Insider's sources highlighted the way Coatue's program interpreted ecommerce data. It reportedly showed surges in website traffic for certain retailers as COVID-19 lockdowns spread across the world -- usually a positive sign for stock -- but failed to consider their dwindling revenues and closed physical stores. But Coatue's quant fund had underperformed long before COVID-19 hit. In February, reports surfaced showing it had posted only 2% returns since its launch in May 2019, and had actually lost money (1.2%) in last year's fourth quarter. On the other hand, Laffont's human-led fund bested the industry average to return 10% profit last year. Bloomberg has since noted that those profits have taken a hit, bringing its losses the year to roughly 6%. While quant funds as a whole have had a really tough year, there were at least two that are doing just fine. "Toronto's Castle Ridge Asset Management, which trades some $100 million in assets, made 2.6% in March with its 'self-evolving' AI system that works with large-cap stocks," reports The Next Web. "Over in Sweden, Volt Capital Management AB (in charge of roughly $30 million in assets) has returned a loin-tickling 24% to investors this year. Volt's fund was also reportedly prepared for those plunging oil prices."

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