Man Vs. Machine: The Race To Market Bottom Analysis

In a blow to human judgement, "computer-driven quants, which pick shares based on factors like momentum and size, have been the only hedge fund category to buy additional stock in 2016," Bloomberg reported, citing data from Credit Suisse Group AG.

According to Credit Suisse Global Head of Risk Advisory Mark Connors, the a.i. strategies "helped quants take advantage of an energy rally that fundamental managers missed," Bloomberg paraphrased.

Related Link: 3 Of The Stocks Most Sold By Hedge Funds In 2016

"When the rate of change of prices skyrocketed from 30 to 70 percent higher, that momentum is not lost on quants. Not only do they have a lens and a process that caught these changes, in addition, these managers were able to exit shorts and get long these names as they were rising," Connors noted.

At a time when managers are shorting energy, quant funds' valuation input likely indicated a signal to buy. "The value part of the model would have suggested going long energy six months ago. The momentum part of the model would be suggesting to go long energy now," Abhra Banerji, director of quantitative research at Evercore ISI, told Bloomberg.

"Definitely at this point, more energy stocks are momentum stocks than previously."

Bloomberg added, "From the February low, quants tracked by Credit Suisse increased their exposure to stocks by 11 percentage points, while the measure for traditional hedge funds dropped more than 1 point.

"Over the same period, the S&P 500 rallied as much as 16 percent, boosting the quants' returns for the year to as much as 8 percent, according to Connors. At the same time, the best of the hedge funds were flat."

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Posted In: Analyst ColorHedge FundsAnalyst RatingsTechMediaGeneralAbhra BanerjiBloombergCredit SuisseEvercore ISI
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