Indy Telecom & Industrial Media

Post-August 2007, everyone seems to be saying that the age of quants and quant-based hedge funds are over and other such dire doomsday predictions. Even the bigwigs lost a good bit of money and people are probably more than a little wary of quant-based hedge funds at the moment.

But here is the question — was it really quantitative trading that did them in or was it the fact that they were leveraged beyond redemption?

Sure, part of the quantitative strategy involved some rather convoluted leveraging, but I think that the important thing to keep in mind is that a lot of the ones that failed were ones that were heavily-leveraged. Similarly, there were a lot of quant-based hedge funds that were not as heavily leveraged that did rather well.

While it may take a while for the landscape to clear out and settle, it is worth considering that quant-based hedge funds may not necessarily be a bad thing. But leveraging, as we’ve seen, can even bring down the greats.

Thoughts?