Wall Street Journal – Quantitative fund managers, who use computer models rather than human judgment to pick securities, have seen their world turned upside down by the credit crisis.

The first generation of managers and their models have moved on: Their inheritors are having to accommodate a changed landscape full of skeptical investors. In reaction, quant managers have spent 2008 making adjustments to their models, finding new sources of data and tightening secrecy.

Asset managers, in general, are facing tough times, but stock-picking is at least a familiar and well-worn concept for investors. They may not always be happy with their human asset managers, but they are continuing to talk to them. The so-called black boxes that carry out the complex strategies of quantitative funds, on the other hand, are increasingly out of favor with investors and investment consultants.

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Tags: asset-managers, black boxes, computer models, credit-crisis, fund-managers, human asset, human judgment, investment consultants, investors, landscape, quantitative funds, secrecy, stock picking, tough-times, wall street, wall-street-journal

Reuters – In a period when volatile markets battered most hedge funds, global macro funds are proving their worth, Graham Capital Chairman Kenneth Tropin told Reuters.

During one of the hedge fund industry’s worst years, Graham delivered gains of up to 41 percent in 2008 by making good bets on currencies, stocks, interest rates and commodities. And because the firm invests in highly liquid futures, clients had monthly access to cash even as many funds blocked withdrawals.

The combination of liquidity and returns that are independent of the broader market could revive interest in global macro funds, Tropin said.

"For a long time there was a perception that the biggest returns, the best risk-adjusted returns, were in other strategies. Then we had a market environment last year where most hedge fund styles ended up being correlated to each other and to the equity markets as well," he said.

Graham manages $4.9 billion in assets in human-directed funds and computer-driven quantitative funds. Funds in both categories invest across fixed income, currency, commodity and equity futures.

"Our style of investing offers some benefits, including liquidity and diversification, that may have not been appreciated as much as they should be," he said.

Graham’s quant funds gained from 20 percent to 41 percent last year, while human-directed funds rose by 6 to 27 percent. By comparison, the average hedge fund lost 28 percent.

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Tags: bets, commodities, commodity, diversification, fixed income, futures, global macro, interest rates, liquidity, market environment, perception, quant funds, quantitative funds, reuters, risk adjusted returns, tropin, volatile-markets, withdrawals