(HedgeCo.Net) Quantitative or systematic hedge funds have been caught in a challenging stretch: since October began, many are reporting daily losses, according to a client note from Goldman Sachs. TradingView
These funds, which rely on algorithmic models and machine?driven signals, have suffered from crowded trades and synchronized exits. The note says that since the start of October, these funds have marked continuous negative performance, with cumulative losses hitting around 1.8?% for the month so far. TradingView+1
This is notable given that systematic funds had posted solid performance year?to?date (YTD) heading into October. But their susceptibility to trend reversals and sudden regime shifts is now being tested in volatile markets. TradingView
Analysts point to two main stressors:
- Crowded positioning: Many quant funds deploy similar signals or factor models (momentum, mean reversion, volatility). When those models align, a sudden shift can force correlated exits, exacerbating losses.
- Macro uncertainty & regime change: Abrupt shifts in interest rates, monetary policy surprises, or geopolitical shocks can break the statistical relationships on which quant models depend. The models may have been overfitted to benign regimes, leaving them brittle in stress.
The current weakness in quant hedge funds adds a layer of caution for allocators who had leaned on them as diversifiers. While quant strategies are often pitched as offering low correlation, in stressed markets they may become less reliable.
Still, some hedge funds with macro or discretionary flex — not purely quant — are faring better in 2025. As of early March, macro funds had delivered outsized returns by navigating volatility and directional macro themes. Investing.com Going forward, the quant crowd may need to re-examine models, risk controls, and skew exposures. Some funds could reduce leverage, impose factor de?crowding, or hedge against potential trend reversals. The next few weeks will likely reveal whether this drawdown is a temporary setback or a catalyst for rethinking quant allocations
