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‘Quant’ hedge funds headed for worst month since Aug 2007

(Reuters) – Computer-driven hedge funds are headed for their worst monthly performance since the start of the credit crunch after making losing bets in dozens of markets including bonds, currencies and commodities.

Many of the funds, known as managed futures or commodity trading advisors (CTAs), came into October with “risk on” trades, such as long positions on equities and commodities, and a short position on the U.S. dollar.

But the trends that these managers try to detect and profit from – using ultra-complex algorithms designed by legions of astrophysicists and mathematicians – have “reversed” and gone against them in multiple markets.

The average fund is down 5.63 percent this month to October 25, according to Newedge’s CTA Trend Sub-Index. If the index stays at or around that level at month end, the performance will rank as their worst month since August 2007.

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