Quant Hedge Funds thrive in Q1 | Paragon Alpha

Quant Hedge Funds thrive in Q1

By Matea Gucec

Quantitative hedge funds, which rely on algorithms to predict market trends, are seeing impressive gains in 2024. With bets on rising cocoa prices and a falling Japanese yen, these funds have achieved a 12% return by the end of March, as reported by Société Générale's index. Notable performers include Man Group, Aspect Capital, and Winton.

Aspect Capital, managing $9.4 billion in assets, reported its best first quarter ever, according to Razvan Remsing, director of investment solutions. British billionaire David Harding's Winton saw a 13% gain in its diversified macro fund, fueled by successful bets on cocoa prices, US natural gas, and the yen. AQR's managed futures strategy returned 17.4%, while Capital Fund Management's IS Trends fund was up 17.5%.

Cocoa prices have surged due to adverse weather in West Africa, tripling cocoa bean futures in London since January. Similarly, high temperatures have affected coffee bean production, another profitable avenue for quant funds.

Man AHL's Otto Hamaoui noted that supply shocks from bad weather have strengthened prices, benefiting these funds. Additionally, the yen's 9% fall against the dollar since the start of the year, and a 30% decline over three years, have provided further opportunities. Hedge funds have also profited from rising oil prices due to Middle East tensions.

The broad range of market trends has encouraged funds to increase leverage, enhancing returns. Aspect Capital increased its leverage from four to seven times but reduced its cocoa positions due to increased volatility. Aspect's flagship fund achieved a 21.4% return by the end of last week.

These returns mark a recovery for trend-following strategies after losses from the Silicon Valley Bank collapse last year. Société Générale’s Trend index has risen 45% over the past three years, indicating a strong comeback for these strategies.

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